Barry Zalma, Inc. on Insurance Law

Protective Safeguard Endorsement is a Condition Precedent for There to be Coverage In Mama K's Diner, LLC v. AMCO Insurance Company, F082800, California Court of Appeals, Fifth District (January 17, 2023) the trial court granted summary judgment to AMCO Insurance because the insured did not maintain a promised automatic fire alarm system. Mama K's appealed. FACTS Mama K's Diner, LLC (Mama K's) appealed from a grant of summary judgment for defendant AMCO Insurance Company (AMCO). The case involved a dispute over insurance coverage for Mama K's restaurant, which was damaged by a fire. Mama K's sued AMCO for breach of contract and breach of the implied covenant of good faith and fair dealing, contending the damage is covered under the insurance policy it bought from AMCO. AMCO denies there is coverage because Mama K's did not have an automatic fire alarm as required by the policy. The trial court granted summary judgment for AMCO, concluding the damage was not covered because undisputed evidence showed that Mama K's failed to maintain an automatic fire alarm as was required for fire coverage. Mama K's operated a restaurant called Mama K's Diner out of a building on Main Street in Visalia from April 2016 to December 26, 2018 (the day of the fire). As part of the insurance policy application, the broker submitted a form that erroneously stated Mama K's had a central station fire alarm. Topa issued Mama K's an insurance policy with a "Protective Safeguards" endorsement conditioning coverage for fire damage on Mama K's maintaining an automatic fire alarm protecting the entire building. The Policy insured Mama K's business personal property. The Policy included a "Protective Safeguards" endorsement stating: FIRE PROTECTIVE SAFEGUARDS We will not pay for loss or damages caused by or resulting from fire if, prior to the fire you: .... Failed to maintain any protective safeguard as designated at each premises by symbol in the Declarations and over which you have control, in complete working order. The 'Protective Safeguards' endorsement also includes the following "NOTICE" in bold capitalized font: 'YOU RISK THE LOSS OF CERTAIN INSURANCE COVERAGE AT PREMISES DESIGNATED IN THE DECLARATIONS IF YOU FAIL TO MAINTAIN ANY OF THE APPLICABLE PROTECTIVE SAFEGUARDS, LISTED BY SYMBOL IN THE DECLARATIONS FOR EACH PREMISES.' On December 26, 2018, a fire caused substantial damage to the restaurant. Mama K's submitted a claim to AMCO. The owner, Huff, spoke with an AMCO adjuster and told him the restaurant did not have an automatic fire alarm. In fact, the restaurant never had an automatic fire alarm. Instead, the restaurant only had an automatic burglar alarm system monitored by a security company. The burglar alarm system keypad had a button marked "fire," but that button had to be pressed by someone to trigger an alarm. The fire happened at 1:00 a.m. when no one was inside the restaurant to press the "fire" button on the keypad. DISCUSSION The Breach Of Contract Cause Of Action The Court of Appeal concluded the grant of summary judgment on the first cause of action was proper based on the theory of breach alleged in the complaint. In the insurance context a condition precedent refers to an act, condition or event that must occur before the insurance contract becomes effective or binding on the parties. ANALYSIS The undisputed evidence in the record showed that the Policy contained a protective safeguards endorsement requiring that Mama K's must maintain an automatic fire alarm to be covered for fire damage, and that Mama K's failed to maintain an automatic fire alarm. AMCO, therefore, was not obligated under the Policy to pay any benefits on Mama K's claim. The maintenance of the automatic fire alarm was a condition precedent for fire coverage which Mama K's failed to satisfy, and therefore Mama K's cannot maintain its suit against AMCO for breach of contract. The most important fact remained that the breach of contract cause of action clearly states that Mama's K's theory of breach is that the Policy's express terms provide coverage and refused to accept the protective safeguards endorsement's requirements. The Bad Faith Cause of Action The law implies in every contract, including insurance policies, a covenant of good faith and fair dealing. A breach of the implied covenant of good faith and fair dealing involves something more than a breach of the contract or mistaken judgment. To establish a bad faith claim, the insured must show that (1) benefits due under the policy were withheld and (2) the reason for withholding the benefits was unreasonable or without proper cause. Since summary judgment was proper on all causes of action against AMCO, there was no basis for an award of indemnity nor punitive damages against it. The judgment was affirmed. ZALMA OPINION Conditions precedent are important promises made by an insured. In this case Mama K's promised to maintain an automatic fire alarm system as a condition of coverage for fire. Mama K's failed to do so, it only had an automatic burglar alarm, and failed to keep its promise. People insured, just like insurers, must keep the promises they make. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

No Bodily Injury - No Property Damage - No Coverage In Westfield National Insurance Company; Motorists Mutual Insurance Company v. Quest Pharmaceuticals, Inc., Nos. 21-6026, 21-6043, United States Court of Appeals, Sixth Circuit (January 13, 2023) suits against opioid manufacturers and distributors for expenses were rejected because plaintiffs incurred neither bodily injury nor property damage. In the wake of a nationwide opioid epidemic, aggrieved individuals, local governments, and other organizations are taking pharmaceutical companies to task for their allegedly wrongful conduct in promoting and distributing prescription opioids. Quest Pharmaceuticals, Inc. ("Quest"), a Kentucky-based distributor of generic drugs, now finds itself on the receiving end of approximately 77 such lawsuits. Quest reported the litigation to its insurers, Westfield National Insurance Co. ("Westfield") and Motorists Mutual Insurance Co. ("Motorists"), who promptly sued in federal court and sought declaratory judgments that they were not required to defend or indemnify Quest in the underlying lawsuits. The district court granted summary judgment to the insurers, reasoning that the relevant policy language did not cover the claims brought against Quest. BACKGROUND The underlying plaintiffs plead violations of the RICO Act, violations of state statutes, and common law claims of public nuisance and negligence. The underlying plaintiffs' damages include "significant expenses for police, emergency, health, prosecution, corrections, rehabilitation, and other services." Many of the complaints also clarify that the plaintiffs' claims, "are not based upon or derivative of the rights of others" and that the plaintiffs "do not seek damages for death, physical injury to person, emotional distress, or physical damages to property[.]" Given that the court found that the policies did not require either insurer to defend or indemnify Quest in the underlying litigation, it never reached Westfield's alternative argument that the policies' "known-loss" provision, which excludes injuries the insured knew of before purchasing the policy, also precluded coverage of the underlying lawsuits. ANALYSIS As a federal court sitting in diversity, he Sixth Circuit must apply Kentucky law to this question of contract interpretation. In accordance with Kentucky law, the Sixth Circuit was required to interpret the policies "according to the parties' mutual understanding at the time they entered into the contracts]" based solely-where possible-on the plain language of the contract. Plain Meaning Broadly speaking, terms in an insurance policy are given their plain and ordinary meaning, such that words with no "technical meaning in law" are interpreted in accordance with common use and understanding. The policies here require the insurers to defend Quest against lawsuits seeking "damages because of bodily injury" and indemnify Quest for any such damages that Quest becomes "legally obligated to pay[.]" An insurer's duty to defend arises whenever an allegation in an underlying complaint "might" fall within the policy's purview. The underlying lawsuits seek "damages" within the meaning of the policy; they also agree that the lawsuits do not seek damages directly "for bodily injury." The sole disagreement is whether the damages sought are "because of bodily injury." "Because Of" Generally, the phrase "because of" means on account of or by reason of. Quest argued that the underlying lawsuits are "because of bodily injury" where they would not have been brought but for injuries caused by opioid abuse and addiction, and thus exist by reason of or on account of those underlying injuries. The insurers argued, on the other hand, that the claims are not "because of bodily injury" where they fail to allege any particular bodily injury and seek only economic damages for costs the underlying plaintiffs incurred in addressing the opioid epidemic. In this case the underlying plaintiffs seek economic damages not to compensate an explicitly covered injury, but rather to cover the costs of activities conducted in relation to many indeterminate injuries. As a result, the Sixth Circuit agreed with the district court that the lawsuits against Quest are not "because of bodily injury" within the meaning of the policies. The Sixth Circuit concluded that lawsuits brought by local governments and other entities to recover costs incurred due to the opioid epidemic-but not to recover for any specific bodily injuries-do not trigger the insurers' duties to defend or indemnify Quest. The parties agreed that the lawsuits alleged no particular injury to any particular person. The allegations instead broadly described societal harms caused by opioid addiction, such as diminished productivity and increased healthcare costs which the underlying plaintiffs tie to Quest's and other pharmaceutical companies saturation of communities with prescription opioids fueling illicit opioid addiction. As such, the underlying lawsuits against Quest are not "because of bodily injury" and the insurers have no duty to defend Quest or indemnify it for any damages it may owe. The definition of "damages" likewise informed the Sixth Circuit’s understanding of the policies' scope and purpose-namely, covering tort claims. Nothing in the policies suggested that they were meant to cover lawsuits like the ones here, brought primarily by local governments to recover purely economic damages. The plain language instead indicates that claims must in some way derive from a particular bodily injury to a person. Although some of the complaints plead tort claims such as nuisance or negligence, the underlying theory of recovery is that Quest's alleged misconduct resulted in economic harms to the entities themselves. No complaint predicates recovery on a particular person's bodily injury, and so no complaint triggers the insurers' duty to defend. The claims, all of which are for economic damages, are, in the opinion of the Sixth Circuit, simply beyond the policies' scope. ZALMA OPINION The Sixth Circuit read the full text of the policies and the allegations of the suits against the insured. As a result, finding no bodily injury or property damage, coverage for the suits seeking damages from the insured for the costs the opioid drug infestation cost various cities and other public entities were economic only, no damage due to the insured against risks of claims of bodily injury or property damage. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Theft by Fraud, Trick or Device Not Covered In Civitas-IT, LLC v. Auto-Owners Insurance Company, No. 359731, Court of Appeals of Michigan (January 12, 2023) BASIC FACTS Plaintiff, a company that provides information technology services, brought suit against defendant for breach of contract and bad-faith denial of a claim under MCL 500.2006 after defendant denied plaintiff's insurance claim for computer equipment that was fraudulently procured by an imposter. In July 2020, plaintiff received an inquiry from an individual purporting to be from the purchasing department for Macomb County. The individual stated that Macomb County was interested in purchasing new computer equipment and asked plaintiff to facilitate the transaction. Plaintiff did so only to later discover that Macomb County never ordered the equipment. Plaintiff submitted a claim for the loss to defendant for $165,195, which defendant denied. In the trial court, defendant moved for summary disposition asserting that the insurance policy did not cover plaintiff's loss because the policy explicitly excluded any loss that was the result of "[v]oluntary parting with any property by you to anyone else to whom you have entrusted the property if induced to do so by any fraudulent scheme, trick, device or false pretense." Plaintiff argued that the loss was covered by the "accounts receivable" endorsement, which stated defendant would cover "[a]ll amounts your customers owe you that you cannot collect ...." In response, defendant asserted that the imposter that obtained the computer equipment was not a "customer" and, therefore, the endorsement did not apply. The trial court concluded that the policy did not cover the loss because the account was not an "account receivable." Thus, the court granted defendant's motion for summary disposition. This appeal followed. DISCUSSION An insurance policy is read as a whole, and meaning should be attributed to all terms. Unambiguous insurance policy language must be enforced as written. In the accounts receivable endorsement, defendant agreed to cover "[a]ll amounts your customers owe you that you cannot collect" and "[o]ther expenses you reasonably incur to reestablish your records which result from direct physical loss of or damage to your records of accounts receivable." Thus, contrary to plaintiff's argument, the term "accounts receivable" is more than just a label on the endorsement, it is a term itself in the language of the policy. For its part, the trial court defined the term as involving "a bill/statement, repeated billings followed by informal and friendly inquiries, and then stronger language and efforts." Under the trial court's formulation, the account was an account receivable because plaintiff did record a statement for the transaction in its accounts, and made efforts to collect the money, at first with friendly inquiries and ultimately culminating in involving law enforcement and filing this lawsuit. Even though the account itself was an account receivable it was not an account receivable with a “customer.” The question of whether the imposter was a "customer" under the policy required the Court of Appeal to address three questions. If the insurance policy is not rendered ambiguous simply because the term "customer" is undefined. If the relevant question is whether the policy, when read fairly and as a whole, permits differing interpretations as to whether coverage is afforded. If the policy, in general, does not cover losses that are the result of fraud. Specifically, in the exclusions for covered losses, the parties agreed that defendant would not be responsible to pay for losses that were the result of "[v]oluntary parting with any property by you or anyone else to whom you have entrusted the property if induced to do so by any fraudulent scheme, trick, device, or false pretense." Plaintiff contends it negotiated around this provision by incorporating the accounts receivable endorsement, essentially arguing that because a customer can cause plaintiff to have a loss on an account by failing to pay, and because an imposter can be a customer, the imposter, by defrauding plaintiff, can cause the loss which must be covered by defendant. This is not a fair reading of the entire policy because an imposter is not a customer. The term "customer" is defined in Black's Law Dictionary (11th ed) as "[a] buyer or purchaser of goods or services; esp., the frequent or occasional patron of a business establishment." The relevant terms in this definition are "buyer" and "purchaser," both of which imply the exchange of money from the customer for goods or services from the business. In this case, not only was there not an exchange of money, but it is also clear that there never was an intent by the imposter to ever pay for the computer equipment. Thus, under the dictionary definition, the term "customer" does not encompass the imposter that defrauded plaintiff in this case. Defendant issued the policy to plaintiff under which the parties agreed that defendant would not cover losses that resulted from any fraudulent scheme, trick, device, or false pretense. ZALMA OPINION Insurance is a contract designed to indemnify an insured against fortuitous losses. However, even if a fraudster obtains product by tricking the insured into believing they were selling to a City, it was defrauded and that person was not a "customer" because he or she never intended to purchase the computer equipment. The "fraudulent scheme, trick, device, or false pretense" exclusion is hoary with age and fits the facts of this claim perfectly. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Canada Requires Owner Occupant to Occupy Dwelling for Coverage to Apply In Dang C. v. Industrielle-Alliance, Assurance Auto et Habitation Inc., 2022 QCCA 1739, the Court of Appeal for the Province of Quebec, an opinion in French, provided that Dang was the sole insured under a policy which covered "owner occupant" ("propriétaire occupant") and "your dwelling" ("votre bâtiment d'habitation"). Respondent had insured the house since 2012 and in May 2018, the house was damaged by fire. During its investigation, the insurer concluded that appellant had sporadically traveled to the United States from 2013 to 2016 and that she had been living in the United States since February 2016 without any intention to reside in Quebec. The house was, however, continuously occupied by family members. At trial,Dang argued that she had every intention of returning to Quebec. In addition she no longer had automobile insurance in Quebec, had acquired a new residence in Texas with her spouse, tried unsuccessfully to sell her house and obtained her permanent resident status and green card in the United States. The insurer established with two independent insurance company representatives that they would not have renewed the policy had they known that the insured did not have any intention of coming back to live in the house. According to Dang "occupant" means a person who exercises either personally or through another person, a real right on property without necessarily having a lease. As such, according to Dang the Superior Court judge erred in concluding that she did not occupy her residence at the time of the fire. The Court of Appeal Decision The Court of Appeal noted that there was no ambiguity in the policy and that the object of the contract is to insure the owner who occupies the residence. Dang did not fulfill the condition for at least two years prior to the fire. The Court concluded that "owner occupant" must be interpreted according to its ordinary meaning and in a manner which an ordinary person who seeks insurance would understand. The Court of Appeal also added that it would not intervene in the decision of the trial judge to retain the testimony of the two independent insurance company representatives to support the decision to annul the policy. The Court of Appeal concluded that an insurer may refuse to indemnify an insured if following a change of circumstances, the risk which materialized is no longer covered at the time of the loss. In such a case the will of the insurer to never cover such a risk applies and is not an aggravation of a risk. In Canada, the insurance policy must be analyzed and one must identify what risk of loss the insurer had the intention of insuring. Once the object of the insurance is identified, the court determines if the insurer had manifested the intention of insuring the risk which materialized, that is, a house not occupied by the insured. The word "occupant" adds to the word "owner" the notion of living in the house insured. Furthermore, the expression "your dwelling" confirms the meaning which the insurer intended on giving to its contract which, until February 2016, conforms to what the Dang wanted to insure, her house in Trois-Rivières. The insurer satisfied its burden of establishing that the insured no longer was "owner occupant" of the house. The risk materialized was no longer what the insurer wanted to insure. The Court of Appeal further underlined that the insurer clearly demonstrated that it would have put an end to the contract had it been informed of the situation of unoccupancy. ZALMA OPINION Our neighbors in Canada agree with the courts in the U.S. that a policy that insures a residence premises and requires the insured to occupy the residence for coverage to apply. This is not an exclusion, but acts like one. Since insurance is a contract of personal indemnity - it does not insure the dwelling - it only insures the insured against the risk of loss of the dwelling. If the insured no longer lives in the dwelling - and this insured moved countries and became a permanent resident of Texas, she was not living in the home in Quebec and therefore the risk insured was changed and she could recover nothing under the policy. Americans, with homeowners policies, face the same problem. If I left my home and moved to Texas, my California Homeowners policy would not insure me against the California house's loss unless I advised the insurer, changed my coverage from a homeowners to a rental policy. Ms. Dang hid the change from her insurer and lost. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

There Must be an Actual Change in the Appearance, Shape, Color, Or Other Material Aspect Of The Property for Coverage to Apply Plaintiff MTDB Corporation d/b/a Striker Lanes (MTDB) sued seeking declaratory judgment action against defendant, American Auto Insurance Company (AAIC), seeking a declaration that AAIC owed it coverage for alleged business losses and property damage due to the COVID-19 pandemic. In MTDB Corporation D/B/A Striker Lanes v. American Auto Insurance Company, 2022 IL App (1st) 210979-U, No. 1-21-0979, Court of Appeals of Illinois, First District, Sixth Division (December 30, 2022) the Illinois Court of Appeal followed the Illinois Supreme Court requiring actual physical damage to property and refused coverage to the plaintiff. BACKGROUND MTDB sought coverage under the property coverage and the civil authority endorsement provisions of the policy. The policy at issue provided property, general liability, and automobile coverages for the policy period of August 19, 2019, to August 19, 20202. The relevant portions of the policy and Section A of the business income coverage form states that: "[w]e will pay for the actual loss of business income you sustain due to the necessary suspension of your operations during the period of restoration. The suspension must be caused by direct physical loss of or damage to property at the premises described in the Declarations, including personal property in the open (or in a vehicle) within 100 feet, caused by or resulting from any Covered Cause of Loss." In response to MTDB's declaratory judgment complaint, AAIC moved to dismiss MTDB's complaint with prejudice. In support of its motion, AAIC indicated that it denied coverage under the policy because MTDB did not suffer direct physical loss or damage to its property as a result of the COVID-19 virus, and further that the government closure of MTDB's business did not trigger coverage under the civil authority endorsement. The circuit court granted AAIC's motion to dismiss the complaint based on the allegations in the complaint, MTDB was required to suspend or significantly reduce its business operations because of executive orders and that the losses sustained by MTDB were economic and not due to permanent loss of or physical alteration to property. The circuit court relied on the supreme court's decision in Travelers Insurance Co. v. Eljer Manufacturing, Inc., 197 Ill.2d 278 (2001) in holding that the plain and ordinary meaning of "physical injury" is damage to tangible property that causes an alteration in appearance, shape, color, or other material dimension, and that MTDB had not alleged that the probable presence of COVID-19 in, on, or around their property caused any alteration in their property's appearance or any other material dimension. ANALYSIS Since a motion to dismiss admits all well-pleaded facts and attacks the legal sufficiency of the complaint in ruling on a motion to dismiss, only those facts apparent from the face of the pleadings, matters of which the court can take judicial notice, and judicial admissions in the record may be considered. When an insured sues its insurer over a denial of coverage, the existence of coverage is an essential element of the insured's case, and the insured has the burden of proving that his loss falls within the terms of his policy. Just because a term is undefined by the policy does not render it ambiguous. Where a term in an insurance policy is not defined, the court gives that term its plain, ordinary, and popular meaning. As the Court of Appeal concluded in earlier cases, according to the Illinois Supreme which defined "physical" for purposes of interpreting direct physical loss or damage for insurance coverage, there must be an actual alteration to the appearance, shape, color, or other physical aspect of the property in order for there to be coverage under the policy. The supreme court was quite clear that under its plain and ordinary meaning, "physical" meant just that- pertaining to natural or material things. Accordingly, the circuit court did not err in reaching that conclusion. The COVID-19 virus does not alter the appearance, shape, color, or other physical aspect of the property to trigger coverage under the policies at issue. Contamination by the COVID-19 virus can be remedied by routine cleaning or disinfecting of surfaces and the air, all without altering the appearance, shape, color, or other material aspect of the property. Therefore, COVID-19 could not constitute a physical alteration of the property so as to trigger coverage under the policy. ZALMA OPINION Lawyers are persistent people who believe they have better arguments than other lawyers. They continue to argue that Covid-19 caused actual physical damage to the plaintiff's property and they continue to fail to convince courts, even after the state's Supreme Court sets the standard. It just doesn't work and soon dealing with these suits will annoy the trial and appellate courts who will either refuse to hear the cases or sanction those who bring these suits. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

ZIFL - Volume 27, Issue 2 The Source For Insurance Fraud Professionals This, the second issue of 2023 of Zalma's Insurance Fraud Letter contains multiple article that will be useful to all insurance fraud professionals, claims handlers, SIU investigators and insurance coverage counsel. First is an article explaining why tax returns must be produced and can be part of any potential fraud investigator. The Insured Must Produce Tax Returns If the First Party Insurer Demands Production Every first party property policy contains a provision requiring an insured to produce all relevant documents required to be produced by the Insurer and to appear for examination under oath [California Insurance Code § 2071; NY Standard Fire Insurance policy]. The language of the California and New York Standard Fire Insurance policy, mandated to be in all policies of fire insurance issued, provides: When a finding that “no reasonable trier of fact could conclude that Herman cooperated in the investigation or settlement of the claim” where it was uncontroverted that insurer never received financial data, including tax returns and proof of income. When an insured refused to produce his income tax returns finding it was a substantial and material breach of his contractual duty to cooperate which clearly prejudiced the insurer’s investigation into possible motives for arson. Read the full article at ZIFL-01-15-2023 Free Insurance Videos Barry Zalma, Esq., CFE has published five days a week videos on insurance claims, insurance claims law, insurance fraud and insurance coverage matters at https://www.rumble.com/zalma.https://rumble.com/c/c-262921 where there are now more than 606 free videos and you can subscribe to all of the almost daily new videos. Good News from the Coalition Against Insurance Fraud Victims of a $600M disability scam — the largest-ever — may finally have their long-lost benefits restored. Attorney Eric Conn fooled Social Security into paying disability for thousands of perfectly healthy people. The Eastern Kentucky man built one of the nation’s largest disability practices through pushy self-promotion and dishonest dealings. Conn bribed a local judge, psychologist and doctors to rubber-stamp disability claims for clients, regardless of their health. Many patients weren’t even examined. Social Security stopped their disability payments while figuring out which clients were truly injured, and who was uninjured and making money from Conn’s scam. Hundreds of impoverished, truly injured people lost desperately needed disability money. Many victims were unemployed coal miners, scratching out a sparse living in pain. Conn promised he’d get them their disability checks to help pay for critical medical care. Social Security stopped coal miner Tim Dye’s checks after Conn was busted. Dye’s wife sold her jewelry and possessions from their home. She even begged for water from neighbors. Other Kentuckians lost their homes, and several committed suicide. Conn received 27 years in federal prison last year. Under a recent agreement, however, Conn’s former clients thankfully can have their disability benefits restored if they request new hearings. You can read the full article and all convictions and read the full article at ZIFL-01-15-2023 How to Add to the Professionalism of Insurance Claims Professionals Every insurer, insurance syndicate, insurance brokerage, insurance sales agency, insurer branch office, and vendors to the insurance industry should add to the libraries of their various offices or employees. To add to the professionalism of the staff of insurance professionals, the insurer should make available to each the following books that are available at reasonable prices from amazon.com, the American Bar Association, Thomson Reuters, or Full Court Press, written by Barry Zalma. Details about each book are available at Barry Zalma’s Insurance Claims Library at https://zalma.com/blog/insurance-claims-library/ Read the full article at ZIFL-01-15-2023 Why Insurance Fraud Succeed It is Time for Insurers to be Proactive Against Fraud There has been much hand wringing and wailing over the malfeasance of the corporate officers and directors of FTX Crypto Exchange, Enron, WorldCom and others. No one, however, has gone to the root causes of the situation. It should be a foremost duty of the insurance industry to do whatever it can to defeat insurance fraud and work to compel prosecutors, police officers, fraud division of fraud bureau investigators, SIU investigators, and claims handlers to work to deter or defeat insurance fraud. Read the full article at ZIFL-01-15-2023 Health Insurance Fraud Convictions Doctor Pays $1,850,000 To Resolve Allegations That She Performed And Billed For Medically Unnecessary Cataract Surgeries And Diagnostic Tests Aarti D. Pandya, M.D. and Aarti D. Pandya, M.D. P.C. (“Pandya Practice Group”) have agreed to pay approximately $1,850,000 to resolve allegations that they violated the False Claims Act by, among other things, billing the government for cataract surgeries and diagnostic tests that were not medically necessary, tests that were incomplete or of worthless value, and office visits that did not provide the level of service claimed. You can read the full article and all convictions and read the full article at ZIFL-01-15-2023 The Great Jewel Theft The following is a fictionalized true crime story of Insurance Fraud to explain why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. This story and the more than 80 similar stories help to Understand how insurance fraud in America is costing everyone who buys insurance millions, if not billions, of dollars every year. Twenty years later, after succeeding at insurance fraud, the insured was arrested, tried and convicted of being the leader of a terrorist and criminal organization called the Armenian Mafia. He is now serving a long term in federal penitentiary. Read the full article at ZIFL-01-15-2023 Other Insurance Fraud Convictions Executed for Murder for Insurance Money Robert Fratta, 65, received a lethal injection at the state penitentiary in Huntsville for the November 1994 fatal shooting of his wife, Farah. He was pronounced dead at 7:49 p.m. Fratta, a former suburban Houston police officer was executed in January for hiring two people to kill his estranged wife nearly 30 years ago amid a contentious divorce and custody battle. Prosecutors reported that Fratta organized the murder-for-hire plot in which a middleman, Joseph Prystash, hired the shooter, Howard Guidry. Farah Fratta, 33, was shot twice in the head in her home’s garage in the Houston suburb of Atascocita. Robert Fratta, who was a public safety officer for Missouri City, had long claimed he was innocent. You can read the full article and all convictions and read the full article at ZIFL-01-15-2023 (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

NEITHER BATTERY NOR FAILURE TO REMOVE INTOXICATED PATRON IS AN OCCURRENCE In Crum & Forster Specialty Insurance Company v. Spike's Pub & Grub, d/b/a Vincint Von Hart LLC, and Devin Elliott, No. 3:21-CV-1722-NJR, United States District Court, S.D. Illinois (January 4, 2023) Plaintiff Crum & Forster Specialty Insurance Company (“CFSIC”) sought an order declaring that it owes no duty to defend or indemnify Defendant Spike's Pub & Grub, d/b/a Vincint Von Hart LLC (“Spike's”), in a case pending in the Circuit Court of St. Clair County, Illinois. BACKGROUND Devin Elliott (“Elliott”) sued Spike's Public House, LLC, d/b/a Spike's Pub & Grub (the “Underlying Action”). In the Underlying Action, Elliott alleges that on March 18, 2021, Spike's sold or gave alcoholic beverages to Corey Lyell, causing Lyell's intoxication. While intoxicated, and as a result of his intoxication, Lyell attacked Elliott and stabbed him multiple times, inflicting severe injury upon Elliott. Elliott alleged Spike's was negligent under Illinois law for failing to keep security personnel on the premises, failing to remove intoxicated persons from its premises, failing to protect Elliott from reasonably foreseeable criminal activities committed by its patrons, and failing to establish procedures to maintain the safety of its invitees. Elliott also claimed Spike's otherwise was careless and negligent in providing adequate security; alleged a claim against Spike's under Illinois's Dram Shop Act; and a claim for battery against Lyell. AVAILABLE INSURANCE Spike's was insured under a Commercial General Liability policy issued by CFSIC (“the Policy”). The Policy had limits of liability of $1,000,000 Each Occurrence and a $2,000,000 General Aggregate limit. Spike's sought coverage under the Policy for the claims asserted against it in the Underlying Action. CFSIC, however, advised Spike's in writing that it owed no obligation to defend or indemnify Spike's based on the terms of the Policy. CFSIC filed a Complaint for Declaratory Judgment seeking a declaration that it has no duty to defend or indemnify Spike's under the Policy. Both Spike's and Elliott failed to answer the Complaint, and the Clerk of Court entered default pursuant to Federal Rule of Civil Procedure 55(a) as to both Defendants on July 22, 2022. CFSIC then moved for Default Judgment. LEGAL STANDARD Rule 55(a) requires the clerk to enter default when a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend and that failure is shown by affidavit or otherwise. DISCUSSION In Illinois, like every other state, an insurance policy is a contract and the general rules governing the interpretation of other types of contracts also govern the interpretation of insurance policies. A duty to defend arises if the allegations in the complaint fall within or potentially within the coverage of the policy. This is known as the “eight corners” rule: the court compares the four corners of the underlying complaint with the four corners of the insurance policy to determine whether facts alleged in the underlying complaint fall within or potentially within coverage. If they do, the insurer has a duty to defend. Coverage Under CFSIC's Policy CFSIC first argued that no coverage exists for the allegations against Spike's in the Underlying Complaint because the bodily injury alleged in the Underlying Complaint was not caused by an “occurrence” as that term is defined under Coverage A of the Policy. By their default, Elliott and Spike's have failed to dispute CFSIC's contention that the Policy offers no coverage because the Underlying Complaint does not allege bodily injury or property damage from an “occurrence” as that term is defined in the Policy-i.e., an accident. Accordingly, the Court finds CFSIC is entitled to default judgment as to Count I of the Complaint for Declaratory Judgment. Total Liquor Liability Exclusion CFSIC alternatively argues that, even if the complaint contains sufficient allegations to support coverage, the Policy contains an exclusion that bars coverage. The Total Liquor Liability Exclusion of Coverage A of the Policy provides there is no coverage for “Bodily injury” or “property damage” for which any insured may be held liable by reason of: Causing or contributing to the intoxication of any person; The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.” CFSIC argues that the allegations in the Underlying Complaint fall squarely within the scope of the Policy's Total Liquor Liability Exclusion. Thus, even if the Policy afforded coverage for the bodily injury alleged by Elliott under Coverage A, coverage would be precluded by operation of the exclusion. Because the Total Liquor Liability Exclusion applies to bar any coverage provided by the Policy, CFSIC was entitled to default judgment as to Count II of the Complaint for Declaratory Judgment. CFSIC owed no duty to defend Spike's in the Underlying Action. Indemnification CFSIC also asked the Court to declare that it has no duty to indemnify Spike's. It is well established that the duty to indemnify is narrower than the duty to defend. Because the Underlying Action remains pending in St. Clair County determining whether CFSIC has a duty to indemnify would require the USDC to adjudicate facts in the Underlying Action. Therefore, the Court denied that portion of CFSIC's motion without prejudice. ZALMA OPINION Although the duty to defend is greater than the duty to indemnify, even when the USDC concluded that CFSIC owed no duty to defend, it refused to rule on the duty to indemnify because the trial of the underlying action might - if a miracle occurs - find a cause for the stabbing that is not excluded, as unlikely as that may be. CFSIC should, therefore, monitor the underlying case to protect its rights and to avoid collusion between the plaintiffs and the insured defendants. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Death of Defendant Limits Recovery of Damages to Insurance Unless Timely Claim to Estate of Decedent In Maryland, to facilitate the prompt settlement of decedents' estates, a person must "present" a claim against an estate within six months after the decedent's death or two months after the personal representative mails or delivers proper notice of the need to file a claim within two months, whichever comes first. Maryland Code § 8-103(a) of the Estates and Trusts Article ("ET"). In general, if a claimant fails to meet those statutory deadlines, the claim is "forever barred." In Nicholas Shanefelter v. James Edward Hood, Jr., No. 1913-2021, Court of Special Appeals of Maryland (January 4, 2023) the Court of Appeals resolved the dispute by recognizing that if the decedent had insurance coverage for the claim, the claimant need not present a timely claim against the estate, as long as the claimant files suit against the estate before the applicable statute of limitations has run. In that event, a judgment against the estate is not limited to the amount of insurance coverage, but the amount of the judgment that is recoverable from the estate is limited to the amount of the policy. In essence, the case becomes an action against the insurance policy. In this case, the Circuit Court for Anne Arundel County employed ET § 8-104(e)(2) to limit the amount recoverable from an estate to the limits of the decedent's automobile insurance policy. FACTUAL BACKGROUND On December 1, 2018, appellant Nicholas Shanefelter was involved in an automobile accident with the late James Hood, Jr. At the time of the accident, State Farm Mutual Automobile Insurance Co. insured the car that Hood was driving. Hood died on August 4, 2019, of causes unrelated to the accident. On September 30, 2019, Hood's wife opened an estate on his behalf with the Register of Wills for Anne Arundel County. On February 20, 2020, Shanefelter filed suit against Hood in the Circuit Court for Anne Arundel County. On March 6, 2020, seven months after Hood's death, Shanefelter filed a claim against Hood's estate with the Register of Wills for Anne Arundel County. The claim was untimely. TRIAL COURT VERDICT After a two-day trial in October 2021, a jury returned a verdict in favor of Shanefelter and against the estate in the amount of $285,977.69. One week after the verdict, the estate filed a motion and asked the court to limit the amount of the judgment that was recoverable from the estate to the policy limits of $100,000.00. The motion did not expressly assert what the record already showed - i.e., that Shanefelter had failed to present a timely claim under ET § 8-103(a). Shanefelter opposed the estate's motion, arguing that he had filed a claim against the estate "as soon as he was made aware that Defendant had died" and that the decedent's insurer, State Farm, "had failed to settle the case in good faith." Shanefelter did not argue that he had presented a timely claim. The circuit court granted the estate's motion in a written order that was docketed on December 3, 2021. The order states, in pertinent part, that the estate's "liability is limited to Defendant's liability insurance policy of $100,000." In a written order the judgment states, in pertinent part, that "the amount of the judgment that is recoverable from the estate is limited to the amount of the decedent's liability insurance policy of $100,000." DISCUSSION In its brief, the estate refuted Shanefelter's assertion that he had filed a timely claim within the deadlines dictated by § 8-103(a). Citing the Register of Wills' docket sheet for Shanefelter's claim, which it attached as an appendix to its brief, the estate demonstrated that Shanefelter did not file his claim until March 6, 2020, more than seven months after Hood's death on August 4, 2019. The Court of Appeal concluded that Shanefelter's contentions had no merit. The tacit premise of the estate's motion to limit liability, understood by all, including the circuit court, was that Shanefelter had not presented a timely claim and thus that § 8-104(e) limited the amount recoverable from the estate. At most, he said only that he had filed the claim as soon as he knew of the decedent's death, which is insufficient to satisfy the requirements of § 8-103(a). Therefore, the trial court did not abuse its broad discretion in denying Shanefelter's Rule 2-535(a) revisory motion. Because the record includes a copy of the untimely claim that Shanefelter presented more than a month after the statutory deadline had already passed, the Court of Appeal concluded that it was beyond any serious dispute that Shanefelter failed to present a timely claim. Because of his failure to present a timely claim, Shanefelter could recover, at most, the policy limits of the decedent's insurance policy ZALMA OPINION The Maryland statute is not unusual. Since the estate was established before the suit was filed the plaintiff and his lawyers should have known about the death of the defendant and complied with the requirements of the law. The case went to trial. Shanefelter recevied a favorable verdict but, because of the statute, was limited to the limits of the liability policy issued by State Farm. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Intentionally Building Houses on Contaminated Property Excluded POLLUTERS FORCED INTO BANKRUPTCY Plaintiffs Victor Rosario, Nilda Maldonado, Jose Flores, and Noemi Flores appealed from three Law Division orders dismissing their second amended complaint against the defendant insurance carriers on dispositive cross-motions on whether insurance coverage applies. Having obtained a nearly $2 million judgment against the bankrupt developer of their residential properties – for failing to disclose their homes were built on contaminated properties – plaintiffs sought the proceeds of the comprehensive general liability (CGL) policies issued by the defendant insurance carriers to the developer. The motion judge in the present action concluded the pollution exclusion contained in defendants' CGL policies precluded coverage. Victor Rosario, Nilda Maldonado, Jose Flores, and Noemi Flores v. The Hartford Fire Insurance Co., and The Western World Insurance Co., No. A-1968-20, Superior Court of New Jersey, Appellate Division (January 4, 2023) The Plaintiffs purchased a single-family homes from developer Marco Construction and Management, Inc. in 2006. Unbeknownst to plaintiffs, before Marco Construction subdivided the lots, they were utilized by the previous owner and co-developer, Stephan Musey, Jr., for commercial purposes that contaminated the property. Automotive fluids and waste oil were discharged into floor drains and the soil. In 1988, the underground storage tanks were removed from the site without proper notice to the authorities. Thereafter, the Department of Environmental Protection (DEP) directed Musey to conduct a remedial investigation of the property, but it was not completed. On December 31, 2004, Musey and Dominic Antonini, the principal of Marco Construction, executed a joint venture agreement to develop the property. Antonini was apprised of the property's prior usage. Before Marco Construction took title to the property in February 2005, Antonini received several documents confirming the presence of outstanding environmental issues on the site; thereafter Antonini was told the property was contaminated. Later that year, Antonini built two single-family homes on the subdivided lot. However, Antonini failed to disclose the environmental issues to the realtors or prospective purchasers, including plaintiffs. THE AVAILABLE INSURANCE The following CGL policies issued by the defendant insurance carriers to Marco Construction are at issue in this appeal: defendant Hartford Fire Insurance Company's policy, in effect from April 20, 2004 to May 20, 2005 (Hartford policy); and defendant Western World Insurance Company's policy issued for the following year, May 20, 2005 to May 20, 2006 (Western World policy). Both policies provided substantially similar coverage. Each policy contained virtually identical pollution exclusions and exceptions to those exclusions. In pertinent part, the policies provided: (1) "Bodily injury "or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants": (a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to any insured. However, this subparagraph does not apply to: .... (ii) "Bodily injury" or "property damage" for which you may be held liable, if you are a contractor and the owner or lessee of such premises, site or location has been added to your policy as an additional insured with respect to your ongoing operations performed for that additional insured at that premises, site or location and such premises, site or location is not and never was owned or occupied by, or rented or loaned to, any insured, other than that additional insured [(pollution exclusion exception)] .... The policies also contained exclusions for expected or intended injury, precluding coverage, in pertinent part, for: "'Bodily injury' or 'property damage' expected or intended from the standpoint of the insured." In addition, Western World's policy excluded coverage for known injuries or damages, defined as "bodily injury or property damage which first occurs before the inception date of the policy but continues to occur during the policy period if such bodily injury or property damage is known to any insured prior to the inception date of this policy." FACTUAL BACKGROUND Plaintiffs filed the underlying action. In May 2008, Marco Construction, through its insurance agent, filed a notice of claim under the Hartford policy, advising: "Claimants allege that insured subdivided a property that had known chemical pollutants. Following an investigation, on August 11, 2008, Hartford denied coverage under the pollution and expected or intended injury exclusions set forth in its policy. Marco Construction demanded Hartford and Western World provide "defense and liability coverage protection." Both insurers refused. In June 2014, a five-day bench trial was conducted in the underlying matter against the sellers and builders. On October 16, 2014, the trial court issued a thirty-five-page written opinion accompanying its aggregate judgment of $1,930,118.86, plus interest, on most of plaintiffs' claims. Among several other factual findings, the court determined, "Antonini knew that the contamination issues had not yet been resolved at the site when he agreed to allow Marco Construction to take title to the property." The court further found Marco Construction and Antonini were aware "the property was contaminated before Antonini began excavating the foundations" and "before he built any of the houses" because Trischitta, "told Antonini that 'this ground is contaminated.'" Following plaintiffs' unsuccessful efforts to collect the judgment, a writ of execution was issued against the assets of Marco Construction and Antonini in September 2018. However, the writ was returned unsatisfied. Thereafter plaintiffs sued Antonini, Marco Construction, and Hartford, seeking to satisfy the October 16, 2014 judgment. In October 2020, Western World moved to dismiss the complaint for failure to state a claim. Immediately following oral argument on January 8, 2021, the motion judge issued a decision dismissing plaintiffs' claims on summary judgment. The motion judge also determined the known injury and punitive damages exclusions barred coverage under the policies. THE APPEAL The interpretation of an insurance contract is a question of law for the court to determine and can be resolved on summary judgment. Courts should interpret insurance policies according to their plain, ordinary meaning. If there are no ambiguities in the language, courts cannot write for the insured a better policy of insurance than the one purchased. The pollution exclusion unambiguously excluded coverage for: "'Bodily injury' or 'property damage' arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of 'pollutants'" at the property, which was owned by Marco Construction during the policy periods. The record evidence established Marco Construction and Antonini knew of the property's contaminated status as early as 2004, when Antonini learned of the property's prior usage. The court, therefore concluded that the insurers satisfied their burden of demonstrating the pollution exclusion contained in their policies applied. The plaintiffs' last attempt related to a Certificate of Insurance issued to a bank. The court did away with that argument noting that Certificates of Insurance do not create or bind coverage. A standard Certificate of Insurance only evidences the existence of the policies to which it refers; it does not alter the terms of an indemnity agreement or the parties' contract, nor does it alter or amend the terms of the policies to which it refers. It is not an insurance policy. Accordingly, the court concluded that a certificate conferred no rights on its holder, Sterling Bank. The trial court's decision was affirmed. ZALMA OPINION No insurance contract insures against any possible risk of loss. For the last few decades CGL policies exclude pollution caused damages and all policies - for the last three centuries - exclude intentional acts. In this case the developers, with knowledge that the property was contaminated, knew they were required to eliminate the contamination by order of the appropriate federal agencies, did nothing to cure the contamination, and built houses on the contaminated property and sold it to innocent buyers. That type of tortious, and probably criminal act, is never an act that can be insured against. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Crop Insurer Can Recover Over payments from Farmer One of the maxims of farming is the imperative each year to risk the "up-front costs" of sowing in return for the never-guaranteed prospect of "back-end revenue" from reaping. The Federal Crop Insurance Act helps farmers to manage these uncertainties through a crop insurance system, which the Federal Crop Insurance Corporation oversees. Under this federal program, farmers can purchase insurance from the Insurance Corporation or from an approved insurance provider that the Insurance Corporation reinsures. In Edgar Miller v. United States Department Of Agriculture; Risk Management Agency; Federal Crop Insurance Corporation, No. 22-1209, United States Court of Appeals, Sixth Circuit (January 3, 2023) the Sixth Circuit was asked to be the last word on a series of disputes over payments and over-payments of crop insurance claims. For years Edgar Miller purchased crop insurance, hoping to protect his farm from poor harvests. While the insurance for the most part served that purpose, it also brought him three federal lawsuits, an arbitration, and an adverse agency determination from the Federal Crop Insurance Corporation. Miller challenged this last decision-the agency's decision-under the Administrative Procedure Act. The district court rejected the challenge. The Common Crop Insurance Policy, promulgated under the Act, governs all disputes. The Crop Insurance Policy requires compliance with the Act, attendant regulations, and the Insurance Corporation's procedures. It sets out the particulars of the insurance coverage and the claims process. Certain provisions address the readjustment and repayment of settled claims. Section 21(b)(3), for instance, allows for repayment of overpaid claims if a farmer "knowingly misreported" yield information. And § 21(f) contemplates repayment if a farmer fails "to maintain or provide" certain records. The Policy also requires the arbitration of disputed claims. The Insurance Corporation issues a generally applicable interpretation that binds all program participants. Because these decisions must be generally applicable, any requests for interpretation must not turn on or even invoke "specific facts" or "alleged conduct." MILLER'S CLAIMS Edgar Miller, a corn and soybean farmer, has experienced this "large regulatory regime" firsthand. Helena Agri-Enters., 988 F.3d at 267. He purchased crop insurance from an approved insurance provider, Farmers Mutual Hail Insurance Company of Iowa. After poor harvests in 2012, 2013, and 2014, Miller filed claims. He received payouts for 2012 and 2013. But Farmers Mutual declined his claim for 2014. Farmers Mutual secured a favorable arbitral award and filed a petition to confirm it. The parties returned to the Insurance Corporation. It issued, in response, "Final Agency Determination 287." The ruling explained that multiple policy provisions require farmers to repay overpaid claims, and that insurers have a duty to correct errors in claims. With Final Agency Determination 287 in its hand, if not its ear, Farmers Mutual filed another petition to confirm the arbitral award. This time, the district court granted it, and the Sixth Circuit affirmed. THE APPEAL Having reached the end of the road on the arbitral award proceedings, Miller challenged one premise of that ruling-Final Agency Determination 287-under the Administrative Procedure Act. The district court rejected the challenge. The Sixth Circuit was asked to determine if the Final Agency Determination 287 complied with the Administrative Procedure Act. Only if the ruling is arbitrary and capricious may the Sixth Circuit set it aside under the Act The Sixth Circuit found that Miller's objections to the earlier Determinations were unconvincing. Policy provisions requiring repayment, was inconsistent with § 21(b) and its carve-out of the right of the insurer to request and inspect records and does not fit with the process for correcting claims in the Loss Adjustment Manual. ZALMA OPINION Mr. Miller, a farmer, had his claims disputed mainly because of a lack of effective record keeping that resulted in over payment of his crop insurance claims. The statutes, and the policy that records in insurance form, the statutes, require return of over payments. Miller delayed the process by argument, arbitration, litigation and interesting arguments none of which convinced the Sixth Circuit who confirmed the District Court's ruling. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, is available athttp://www.zalma.com andzalma@zalma.com Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

It is Time For Insurers to be Proactive Against Fraud There has been much hand wringing and wailing over the malfeasance of the corporate officers and directors of FTX Crypto Exchange, Enron, WorldCom and others. No one, however, has gone to the root causes of the situation. It should be a foremost duty of the insurance industry to do whatever it can to defeat insurance fraud and work to compel prosecutors, police officers, fraud division of fraud bureau investigators, SIU investigators, and claims handlers to work to deter or defeat insurance fraud. It is not that some corporate executives, suddenly turned to the dark side and became evil. It is not that police and prosecutors have turned to the dark side. It is, I submit, because they were all trained by the Department of Justice and local prosecutors to believe that there was almost no penalty for their crimes. White-collar crime, especially insurance fraud, has been ignored for the last three decades as a serious crime. A crime unpunished emboldens others who might never consider a life of crime to pursue wealth the easy way. Prosecution of what the Coalition Against Insurance Fraud contends is a $308 billion annual insurance fraud take, the massive crime perpetrated against insurers and government “insurance” programs like Medicare are miniscule, to the point of non-existence. Fraud is rampant and almost universally unpunished. Every year more than $100 billion is stolen from Medicare and Medicaid programs across the country while private property and casualty insurers lose a similar loss closer to $200 billion every year to insurance criminals. Even with the recent push against Medicare and Medicaid fraud by the U.S. Department of Justice, it is still so easy, with so little chance of being caught, to commit insurance fraud. Schools were formed to teach gang members to commit insurance fraud so that they can move out of the dangerous field of armed robbery where, if not killed by the convenience store operator, the robber will surely be hunted down and prosecuted. In my 55 year career trying to defeat or deter insurance fraud I have been told by a prosecutor that the robbery of a convenience store, with a gun, where no one is hurt and $300 is stolen is more important than a $2,000,000 fraud against an insurer perpetrated by the stroke of a pen in the hands of an insurance criminal. The prosecutor refused to prosecute the insurance criminal and the insurer was compelled to defend the lawsuit filed by the fraud without any assistance from the criminal justice system. It appears to me: that the police and prosecutors ignore the person who commits a white-collar crime. Insurers, as victims of crime, are disfavored. Some police officers, prosecutors and judges believe that an insurance company cannot be a victim of a crime. Unlike all other crime victims insurers are required by statute to fund local police agencies and prosecutors, conduct the entire investigation, and present the case to the prosecutor on pain of losing the right to do business. The prosecutor will then review the materials and usually refuse to prosecute for lack of sufficient evidence. Police agencies – except for insurer paid for Insurance Fraud Bureaus – ignore insurance fraud and many other white-collar crimes. CALIFORNIA SIU REGULATIONS The full set of the Regulations are available at https://insurancefraud.us1.list-manage.com/track/click?u=a440c5b647697de580a2fd586&id=193011d9cb&e=5e34ee91b1 The California SIU Regulations were approved in their final form effective October 1, 2020. The SIU Regulations attempt to micromanage the work of insurance company efforts against insurance fraud and were enacted following a model act of the National Association of Insurance Commissioners (NAIC). The California Department of Insurance (CDOI), since the first enactment of the Regulations, has audited hundreds of insurers regarding the SIU Regulations and found that most insurers doing business in California that were audited were in violation of some portion of the SIU Regulations. Major fines, as much as $10,000 per violation, may be imposed on those insurers who refuse, or fail to, comply with the SIU Regulations. Failure to train 100 employees, as an example, can result in a fine from $500,000 to $1 million. In addition to the special assessments enacted to fund the fight against fraud, the California Department of Insurance audits insurers regularly to be sure that each insurer works hard to investigate and seek prosecution of the crime of insurance fraud in accordance with the California SIU Regulations. Simultaneously, the same Department of Insurance punishes insurers for not paying claims rapidly or for not treating insureds or claimants fairly, many of whom are experienced insurance cheats who use the Department’s consumer unit to brow-beat insurers into paying fraudulent claims. In addition, when an insurer’s state mandated SIU accuses an insured of fraud by reporting to the California Department of Insurance or denying a claim for fraud, the insurer will invariably be sued for fraud. Courts and juries, believing the bad reputation that insurers have in the press and public, will assess punitive and exemplary damages against insurers who accuse their insured’s of fraud looking with 20/20 hindsight at the investigation. Similar businesses in the financial sector, who are also regular victims of fraud and other crimes, are not taxed or compelled to investigate crimes committed against them. No one demands that the banking industry pay for prosecuting embezzlers or bank robbers. No one demands that convenience store operators pay for prosecuting people who hold up their stores on a daily basis. No Regulator requires stockbrokers to investigate fraudulent transactions. The imposition upon the insurance industry – and the attendant cost passed to the insurance consumer – is unique. Insurers are treated differently than all other businesses in the United States. George Orwell was right when, to paraphrase, what he had a character in “Animal Farm” say, “all businesses are equal, some are more equal than others.” Clearly, insurers are less equal with regard to crimes perpetrated against them than are other businesses. The SIU Regulations set forth minimum standards. They are not intended to be a text on the handling of suspected fraudulent insurance claims that must be followed slavishly. They do not even claim to be a complete guide to handling suspected fraudulent claims or the investigation of suspected insurance fraud. The Regulations are, rather, an outline of basic claims handling techniques when dealing with a suspected insurance fraud. Common findings of SIU compliance reviews, that insurers should attempt to avoid, include: SIU inadequate or non-existent; Suspected fraud not reported to District Attorneys, CDOI; Fraud referrals (FD-1s) contain errors/omissions; Fraud referrals submitted on outdated forms (FD-1s); Written anti-fraud procedures inadequate; SIU investigation procedures inadequate or non-existent; Continuing training not received by SIU; Anti-fraud training not provided by SIU; Training records incomplete or non-existent; Annual compliance report delinquent; Annual compliance report inaccurate or incomplete; and, Third Party Administrators (TPAs), contracted SIU's not monitored by insurer. When an insurer is found wanting it will be fined by the CDOI and could even lose its right to do business in the state. Other states have similar statutes to the California statute and Regulations following model statutes and regulations created by the NAIC. Do Insurers Get Their Money’s Worth From The Special Taxes Paid for Fighting Fraud? Not really. Since what drives fraudsters to pursue this type of crime is the fact that insurers and insurance regulators are unwilling to prosecute offenders. According to insurance fraud in the U.S. statistics, only a tiny portion — not even 2% — of frauds are prosecuted. The reasons for avoiding prosecution include high trial expenses and unpredictable outcomes. But even though it might be costly and demanding, the prosecution may serve as a plausible threat and thus deter fraudsters. What Do The Results Really Show? Insurance fraud prosecutions and investigations are anemic. Every two weeks I publish in Zalma’s Insurance Fraud Letter, reports of convictions for insurance fraud. Most convictions appear to be about frauds directed against federal “insurance” programs like Medicare, Medicaid, Flood and Crop Insurance programs. Many of the conviction are really the result of a qui tam or whistleblower suit. The criminals are laughing at the insurance industry, the police agencies and the prosecutors. If they are one of the few criminally convicted, they face an average sentence of only five years’ probation and 60 days in jail. Jail time is usually served on weekends so that they can still ply their fraudulent trade on weekdays. Some few convictions are other than health insurance fraud pursued by the state agencies. Fraud bureaus are not as effective as they want to be or want insurers to believe. Because Fraud Bureaus and Fraud Divisions in the various states have minimal staff. Very few of the cases referred for prosecution resulted in a conviction. Those convicted were a minimal percentage of the cases referred by insurers to the Fraud Bureaus. In California, and many other states, the law requires insurers to report suspected fraudulent claims to the Fraud Bureau. California insurers report approximately 2,000 – 3,000 suspected fraudulent claims each month. Few are investigated; fewer are reported to prosecutors for prosecution and even fewer reported to prosecutors for prosecution result in a trial or conviction. Contrary to the belief of many prosecutors, even though people are seldom physically injured by insurance fraud, it is a major crime with a statutory maximum punishment in most of those states where it is a crime, of five years in state prison. When an insured tries fraud by an arson-for-profit it is also a violent crime that often results in injury to bystanders, firefighters, or police officers. Specialists who know insurance and insurance fraud investigate it. It is, at least in California and those states that have a criminal insurance fraud statute, a rather simple crime to prove. It should be the type of case a prosecutor would want to file and take to trial since simply presenting a single false document to an insurer is sufficient to involve a conviction for violation of the local Insurance Frauds Prevention Act like California Penal Code Section 550. Instead, as an ex-prosecutor said to me: “insurance fraud is a crime prosecutors run away from because the cases are usually heavy with documentary evidence and are complex.” It is easy to prosecute an armed robber. A witness and a video of the robbery is all that is needed. When the public is told that a group of criminals steals $300 billion every year from the insurance industry the response is either a cheer or a yawn. Everyone involved in the business of insurance and everyone who buys insurance must make it clear that they are angry with what is happening to their insurance premium dollar. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Insurer Committed Fatal Sin by Sitting Back and Doing Nothing Failure to Conduct a Full and Thorough Investigation to Protect the Insured Caused a Bad Faith Judgment in Favor of one Insurer Against Another Every liability insurer is obligated to conduct a thorough and prompt investigation and if liability is clear must pay to resolve the claim to protect the insured. Failure to do so, where a $40 to $50 million potential verdict was faced by three insurers with a $1 million limit and an offer to settle for $2 million, two insurers paid and a third sat on its rights and did nothing forcing an insurer who was excess to pay to avoid a $50 million verdict at trial. In American Builders Insurance Company v. Southern-Owners Insurance Co, No. 21-13496, United States Court of Appeals, Eleventh Circuit (January 4, 2023) the excess insurer sued the primary for bad faith refusal to settle under the concept of equitable subrogation. FACTS Ernest Guthrie fell from a roof and became paralyzed from the waist down, never to walk again. Within months, his medical bills climbed past $400,000, and future costs projected into the millions. The primary insurer for Guthrie's company was SouthernOwners Insurance Company. SouthernOwners refused to pay any amount to Guthrie to settle the claim, and American Builders and Evanston ponied up a million dollars each. American Builders then sued Southern-Owners for common law bad faith under Florida's doctrine of equitable subrogation. The record does not reflect that Southern-Owners did anything, other than request extensions. On December 17, after internal discussions, American Builders decided to tender its limit. American Builders' counsel notified SouthernOwners of the November 18 demand letter. Since Southern-Owners was listed as the primary insurer, counsel believed that Southern-Owners had a primary obligation to pay, so he reached out to give Southern-Owners a chance to step up before American Builders did. American Builders paid the policy on December 19, and Guthrie provided a release for Beck Construction, American Builders, and Evanston the next day. At that point, Southern-Owners – having only conducted one interview with Beck – ended its investigation. After the close of all evidence, the jury returned a verdict in favor of American Builders, and the district court entered final judgment for $1,091,240.82. THE APPEAL The first and most significant issue in this appeal is whether American Builders proved a bad faith claim. Taking the evidence in the light most favorable to American Builders, a reasonable jury could have found (as it did) both that Southern-Owners acted in bad faith and that its bad faith caused American Builders to pay its policy. ANALYSIS The bad faith conduct must directly and in natural and continuous sequence produce or contribute substantially to producing such damage, so that it can reasonably be said that, but for the bad faith conduct, the damage would not have occurred. The Eleventh Circuit concluded that a bad faith inquiry is determined under the “totality of the circumstances” standard and the court must focus not on the actions of the claimant but rather on those of the insurer in fulfilling its obligations to the insured. That said, a claimant's actions – such as a decision not to offer a settlement – remain relevant in assessing bad faith. The Eleventh Circuit concluded that there was enough evidence to allow the jury to reasonably find that Southern-Owners acted in bad faith because it delayed acting on its duty to investigate and settle Guthrie's claim. That body of evidence could lead a reasonable jury to conclude that Southern-Owners delayed its investigation instead of attempting to resolve the coverage dispute promptly or using diligence and thoroughness. In that delay, a jury could reasonably find that Southern-Owners completely neglected its affirmative duty to initiate settlement negotiations while Guthrie's hospital bills climbed due to his traumatic injury. A reasonable jury could also find that Southern-Owners’ bad faith caused American Builders' damages. When American Builders informed Southern-Owners of Cohen's November 18 demand, Southern-Owners refused to pay because it was still investigating the claims. Evanston had already tendered its $1 million policy on December 10, but the demand requested $2 million, so the next million needed to come from either Southern-Owners or American Builders. After Southern-Owners balked, American Builders had no choice but to tender payment or face defense costs and a potential $50 million verdict. Southern-Owners' delay in investigating and settling led to its inability to tender an offer on December 18. As a result, a reasonable jury could find (as it did) that American Builders' damages stemmed directly and naturally from Southern-Owners' bad faith. Southern-Owners' contract with Beck Construction provided that "[n]o insured will, except at the insured's own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent." "[T]his language requires the insured to obtain the insurer's consent before settling." Am. Reliance Ins. Co. v. Perez, 712 So.2d 1211, 1213 (Fla. 3d DCA 1998). The Florida Supreme Court requires an insurer to establish three things in order to succeed on this affirmative defense: a lack of consent; substantial prejudice to the insurer; and diligence and good faith by the insurer in attempting to receive consent. The first element has a few exceptions. Even if the insured was obliged to obtain consent, the failure to do so is not an affirmative defense unless the insurer also establishes substantial prejudice and evinces good faith in bringing about the cooperation of the insured. Southern-Owners failed to fulfill this requirement A reasonable jury could (and did) plainly find that Southern-Owners did not "show that it [had] exercised diligence and good faith." American Builders did everything when it came to investigating Guthrie's claim and deciding whether the insured should make a payment, all while Southern-Owners sat back and watched it co-insured act in good faith to the insured. ZALMA OPINION The key sin an insurer can commit is sit back and watch others react while its insured is faced with a multi-million dollar claim. Southern Owners sinned and was punished by the Eleventh Circuit. It is essential to every claim investigation that it be conducted promptly, thoroughly and in good faith. Sitting back and waiting for the insured, the claimant or co-insurers to act is a clear and unambiguous failure to deal fairly and in good faith to the insured, the contractor claimed to be responsible for Guthrie's injuries. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

The Tort of Bad Faith The implied covenant of good faith and fair dealing is a concept of insurance law at least three centuries old. It first appeared in British jurisprudence in a case decided by Lord Mansfield sitting in the House of Lords as the highest court in Britain. In Carter v. Boehm. 3 Burrow, 1905, Lord Mansfield explained that insurance is a contract upon speculation; the special facts upon which the contingent chance is to be computed, lie, most commonly, in the knowledge of the insured only. The underwriter trusts to his representation, and proceeds upon confidence that he does not keep back any circumstance in his knowledge, to mislead the underwriter into a belief that the circumstance does not exist, and to induce him to estimate the risk as if it did not exist. The keeping back such circumstance is a fraud, and therefore the policy is void. Although the suppression should happen through mistake, without any fraudulent intention, yet still the underwriter is deceived, and the policy is void; because the risk run is really different from the risk understood and intended to be run, at the time of the agreement. [The Chicago v. Thompson, 19 Ill. 578, 1858 WL 5993, 9 Peck 578 (Ill. 1858)] and the contract of insurance is founded on good faith. Lord Mansfield stated the rule still followed to this day: Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain, from his ignorance of that fact, and his believing the contrary. THE DUTY TO ACT IN GOOD FAITH The implied covenant explains that no party to a contract of insurance should do anything to deprive the other of the benefits of the contract. For insurance to work; for each insurer to properly evaluate the risks presented; for each insurer to obtain the insurance desired; and for each insured and insurer resolve all claims fairly and equitably they must treat each other with the utmost good faith and do nothing to deprive the other of the benefits of the contract. Each party to the contract of insurance is expected to treat the other fairly in the acquisition and performance of the contract. For example, the prospective insured is required to answer all questions about the risk he, she or it are asking the insurer to take and about the person the insurer is asked to insure. Similarly, the insurer must honestly, clearly and in good faith explain to the insured(s) the risks the insurer is willing to take and the terms, conditions and provisions of the contract of insurance. THE CREATION OF THE TORT OF BAD FAITH A tort is a civil wrong from which one person can receive damages from another for multiple injuries to person or property. Insurance, from its inception, was always a contract the breach of which was resolved by traditional contract damages. Since the first policy written on a clay tablet three to five thousand years ago, if the insurer failed to pay a claim the person insured could sue and only receive the indemnity promised by the contract of insurance and nothing more than pre-judgment or post-judgment interest. In addition, since the idea of insurance started, its practitioners and those insured understood insurance to be a business of the utmost good faith. The covenant was explained by Lord Mansfield in the British House of Lords, acting as a high court, in 1766 in Carter v. Boehm (1766) 3 Burrow, 1905, 97 Eng. Rep. 1162, 1164 (K.B.). Such a requirement was rooted in practical wisdom, recognizing that an insurer often lacked the ability to verify the insured's representations before issuing a policy. This practical wisdom still rings true when applied to marine insurance — an industry in which, for example, a policy may have to be issued in London, on a time sensitive basis, for a vessel berthed halfway across the globe. American courts first recognized the doctrine of uberrimae fidei (utmost good faith) in connection with marine insurance contracts in the early nineteenth century. The U. S. Supreme Court confirmed the strict disclosure requirements that the doctrine imposed on an insured in Sun Mut. Ins. Co. v. Ocean Ins. Co., 107 U.S. 485, 510-11, 1 S. Ct. 582, 27 L. Ed. 337 (1883). The judicial basis for the creation of the tort of bad faith was justified because the court concluded, from the evidence produced, that the insurer failed to treat an insured fairly and in good faith. The court felt that the traditional contract damages were insufficient to properly compensate the insured. By so doing courts that accepted the existence of a tort of bad faith, did away with centuries of insurance jurisprudence and allowed the insured to receive, in addition to the contract damages that the insured was entitled to receive under the contract had the insurer treated the insured fairly, tort damages to punish the insurer for its wrongful acts. Insureds, lawyers for insureds, regulators, and courts across the United States cheered the action of the California Supreme Court, for providing a fair remedy to abused insureds. Most of the states emulated the California Supreme Court and adopted the tort created by the California Supreme Court either by statute or court decision. After the creation of the tort of bad faith, if an insurer and insured disagreed on the application of the policy to the factual situation, damages were no longer limited to contract damages as in other commercial relationships. If the court found that the insurer was wrong, it could require an insurer to pay the contract amount plus damages for emotional distress, pain, suffering, punishment damages, attorney fees, and any other damages the insured and the court could conceive in order to deter other insurers from treating their insureds badly. The good intentions of the courts and regulators led to thousands of lawsuits that they believed would deter the wrongful conduct. The courts and legislators adopting the tort of bad faith hoped that the tort of bad faith would have a salutary effect on the insurance industry and force insurers to treat their insureds fairly. However, contrary to the honest and good faith intent of the court, the good intention was contradicted by intelligent lawyers who caused denial of a claim for $40 wrongfully denied that resulted in $5 million verdicts. Juries, unaware of the reason for and operation of insurance, decided that insurers that did not pay claims were evil and that they wrote contracts, so they never had to pay. The jurors were convinced it was appropriate to punish insurers severely even when the insurer’s conduct was correct and proper under the terms of its contract. The jurors and judges were not informed that over the centuries insurers paid out more in claims and expenses than they took in premiums, making profits only by wisely investing the premiums they held in reserve to pay claims, The massive judgments were publicized, and many insurers decided fighting their insureds in court was too expensive regardless of how correct their position was on the contract. They found it less expensive to pay than to fight just as shop owners threatened by the Mafia decided it was better to pay protection to the Mob rather than fight. Most of the massive verdicts were reversed or reduced on appeal. The bad actors raised their premiums and lost little business. Other insurers, faced with the massive verdicts, allowed fear to control reason, and paid claims that were improper or fraudulent. The extra cost was passed on to all insurance consumers. The insurers who acted improperly were punished less than then honest insurers who were threatened with punitive damages. The insurers who treated their insureds badly, in fact, profited since they continued their wrongful acts and only were required to pay the few insureds that sued. Those that did not sue added to the wrongdoing insurers profit margins. Honest insurers paid frauds and claims they did not owe and found they needed to raise premium charges to cover the extra expense. The increased premium paid by insureds to cover the extra expense were a clear example of the effect of the law of unintended consequences. The honest insurers who treated those they insured with good faith and fair dealing who paid off fraudsters and paid uncovered claims to avoid bad faith suits needed to charge more than the bad faith insurers who litigated with their insureds. When I was a young law student, we were taught to either sue in tort and waive assumsit (contract) if you had the facts and the law available to do so. That is no longer the law with regard to contracts of insurance but not with regard to any other contracts. What Every Insurance Professional, Every Insurance Coverage Lawyer, Every Plaintiffs Bad Faith Lawyer, and Every Insurance Claims Person Must know About the Tort of Bad Faith Each party to the contract of insurance is expected to treat the other fairly in the acquisition and performance of the contract. For example, the prospective insured is required to answer all questions about the risk he, she or it are asking the insurer to take and about the person the insurer is asked to insure. Similarly, the insurer must honestly, clearly and in good faith explain to the insured(s) the risks the insurer is willing to take and the terms, conditions and provisions of the contract of insurance. Adapted from my book The Tort of Bad Faith Available as a Hardcover Available as a paperback Available as a Kindle Book. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com

How Laid Off Workers Innocently Become Fraud Perpetrators The story that follows is fiction. It is based, however, on a true situation faced by employers and workers' compensation insurers in Californian where I live. Ralph was a good employee. He arrived for work every day on time. He did his job eight hours a day and never goofed-off. He was loyal to his employer. His diligence got him raises and promotions. In December 2022 Ralph's boss came to him and said, regretfully: “The market fall has hit me hard. I can’t afford to keep paying you. You are laid off.” He was shocked. He could say nothing. He could do nothing to keep his job. He packed up his personal belongings, said “goodbye” to his boss and left. The next day, he went to the state unemployment office. He filed the first claim in his life for unemployment benefits. He was ashamed but had no choice. Coming out of the unemployment office he met a pleasant man who offered him a cup of coffee. Having nothing better to do, he accepted the man's offer of a cup of coffee and sat, drinking it, on a bus bench and talked about his troubles. The man asked detailed questions about Ralph’s job. He explained that the employer was not alone. Other people were suffering just like he was. He explained there was a way to tide Ralph over better than unemployment insurance. The employee was dumbfounded. “Are you offering me a job?” he asked. “No. I am only offering a way to make yourself some money without any effort.” “Is this legal,” the employee asked. “Of course." The kind man replied. "I will refer you to a lawyer I know who will help you file a very legal claim before the Workers' Compensation Appeals Board.” The man gave him the lawyer's card. He explained that under the laws of the state, employees are entitled to medical treatment and benefits if they are injured on the job, even if the injury is emotional. These benefits pay weekly. Since they are tax free, they almost equal Ralph's take home as the designer of websites before he was laid off. The kind man explained that the Workers’ Compensation Appeals Board set the lawyer’s fee and that would usually be a small per­centage of the benefit received. “But I wasn't injured on the job,” Ralph responded. “You just told me how other people had been laid off before you and it had caused you worry and concern. This, I have been told, is a form of stress which a doctor will state is a work related emotional injury” explained the nice man. Ralph, recognizing that his chance of finding a new job in the website development programming industry was small, finished his coffee, took the lawyer's card and went directly to the lawyer’s office that was a short walk from the unemployment office. The lawyer told the employee that it appeared he had a good stress related workers' compensation claim. He had Ralph sign a contingency fee agreement. He then sent Ralph to a doctor who did a ten-minute physical examination and a five-minute interview. After completing his fifteen minutes of work, the doctor told his secretary to prepare a report. She used a standard report form already recorded in her word processor. The report contained twelve pages of medical jargon that concluded that Ralph, the employee, was permanently disabled as a result of job related stress. He gave the report directly to Ralph and told him to deliver it to the lawyer. The lawyer than presented the claim and, with little difficulty, obtained a permanent disability rating for the employee based on the doctor's report. The employer’s workers’ compensation insurer paid the doctor’s bills, the lawyer received his fee and Ralph received disability payments. The solicitor outside the unemployment office received a flat $500 fee from the lawyer for the referral. The doctor, who billed $600 for the complete examination and evaluation, gave the lawyer $200 as the lawyer's fee for the referral. Everybody did very well except the workers' compensation insurer and the employer whose business was having enough difficulties without finding its workers' compensation premiums increased. Ralph received from the workers' compensation benefits, a bonus on top of his unemployment benefits that were sufficient to carry him into his new job six month later with a small nest egg. The insurance buying public, every employer in the state required to maintain workers' compensation insurance, the workers' compensation insurers, and the Workers' Compensation Appeals Board must spend time and money processing a fraudulent claim. The employee did not even know that he was committing a fraud since he relied on the advice of his less than honest lawyer. In most states it is a crime to solicit business for a lawyer for a fee. It is a crime to pay kickbacks to lawyers for referring clients for medical services. It is a crime to present a fraudulent claim to the Workers' Compensation Appeals Board. None of the participants were concerned, investigated or arrested. The workers' compensation system, and the money in the system, hangs from a branch like ripe fruit ready to be picked. The lawyer, his capper/runner and the doctor could not resist picking that fresh fruit. Ralph was one of 15 people the nice man recruited outside the unemployment office and one of 200 he referred to the lawyer that month. This type of crime will continue, despite the criminal penalties, if the employers and insurance industry fail to make clear to all employees in the state that the presentation of a false workers' compensation claim is a crime and the state prosecute those involved in the crime: the capper, the doctor, the lawyer and the innocent criminal like Ralph. The abundances of workers' compensation frauds are destroying the business community. The cost of maintaining workers' compensation insurance, or in paying benefits as a permissively self-insured, as a result of fraud, runs in the billions of dollars. If workers' compensation stopped, most of those people laid off as a result of a technology downturn or recession of 2021-2023 could be rehired. It is time that the public is informed that insurance fraud is stealing money from their pockets, not some rich insurance company. People perpetrating insurance fraud in California alone steal multiple billions of dollars from the insurance industry that loses across the USA $308 billion every year. Fewer people perpetrate this massive insurance fraud than participated in the Portland riots. It is a crime performed without violence. It pays well. Rather than burning a building, the person committing workers' compensation insurance fraud merely signs his name to a claim form, submits a claim to the WCAB, and waits for the money to flow. Although not a violent crime, the crime of insurance fraud has become so rampant that a task force akin to the one used to assist those damaged by Hurricane Ian is needed but will never be constituted. Rather, prosecutors, shy away from insurance fraud cases as if the officer presenting it was infected with a contagious flesh-eating bacteria. As long as it is easy, safe and profitable, insurers and employers who are self-insured will continue to be victims who are considered villains by the public and the courts. They, like rape victims in the middle east, are considered responsible for the crime perpetrated against them, and the actual criminals go free. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Worker's Death Not Covered by E & O Policy To compel coverage under an errors and omissions policy, Roadway Services, Inc. sued its insurer, Travelers Casualty and Surety Company of America seeking defense of a wrongful death case claiming Roadway failed to provide a safe place to work. Travelers argued it has no duty to cover Roadway's claim because of clear and unambiguous exclusions. In Roadway Services, Inc. v. Travelers Casualty And Surety Company Of America, No. 22-3337, United States Court of Appeals, Sixth Circuit (December 29, 2022) the Sixth Circuit resolved the dispute. FACTS In 2018, a driver struck and killed a Roadway employee while he was on the job. His widow sued Roadway for wrongful death, alleging it failed to maintain safe working conditions. Roadway did not seek coverage under its employment-liability insurance contract. Instead, it asked Travelers to pay for its defense out of a directors-and-officers insurance contract. Travelers refused, citing an exclusion in the policy. Roadway sued to compel coverage. Both parties moved for summary judgment and the District Court, finding the policy ambiguous, ruled for Roadway. Travelers appealed. THE INSURANCE POLICY Under Ohio law an insurance policy is generally interpreted like any other contract. Specific provisions govern over more general ones. Roadway's policy covers Roadway's directors and officers as well as the cost of indemnifying them Roadway itself. It insures Roadway for losses "resulting from any claim" made during the policy period. However, the policy also contains a relevant exclusion. Exclusion A.13(d) provides that "with respect to Insuring Agreement C. only," Travelers "will not be liable for loss for any claim . . . based upon or arising out of any employment related wrongful act." ANALYSIS The employment related wrongful act exclusion bars Roadway's claim since the wrongful-death suit involves what the parties agree qualifies as an employment-related wrongful act-Roadway's alleged failure to maintain safe working conditions. Exclusion A.13(d), clearly and unambiguously eliminated coverage of Roadway's losses from the wrongful-death suit. Roadway's arguments otherwise were not convincing. Because of Roadway's alleged failure to maintain safe working conditions, its employee would not have died, and his widow would not have suffered mental anguish and sued. Thus, the losses arose out of Roadway's wrongful act, and Exclusion A.13(d) applies. A claim can both "arise out of" a wrongful act and be a claim for injury brought "with respect to" the act. Nothing in the contract of insurance suggested that the drafters intended to give the terms anything but their plain meaning, even if the meanings include some overlap. The Sixth Circuit concluded that no conflict exists between these two exclusions, nor are the exclusions ambiguous. The district court's judgment was, therefore, reversed, and the case was remanded with instructions to enter judgment for Travelers on the coverage claim. ZALMA OPINION When an employee dies on the job the exclusive remedy available to the heirs is the workers' compensation system. To gain a larger recovery the decedent's spouse filed a wrongful death action claiming the employer was negligent for failing to provide the decedent with a safe place to work. Roadway had employers liability insurance but chose to claim against an E&O policy only to find that a clear and unambiguous exclusion defeated their claim. Why they didn't require the plaintiff spouse to be limited to workers' compensation Roadway sought coverage under a policy not designed to cover a wrongful death claim by an employee. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Claim that $16 Extra Premium on Renewal is Bad Faith Fails Peter Gottlieb claimed that the price he agreed to pay Amica Mutual Insurance Company to insure his home was $16 too high because it was based on an excessive coverage limit. Claiming as well that other Amica insureds paid too much to insure their homes, he filed this putative class action. After the district court dismissed part of Gottlieb's complaint for failure to state a claim and entered summary judgment he appealed. In Peter Gottlieb, individually and on behalf of all persons similarly situated v. Amica Mutual Insurance Company, No. 22-1074, United States Court of Appeals, First Circuit (December 30, 2022) disposed of the class action claims. FACTUAL BACKGROUND Gottlieb owns a home in Burlington, Massachusetts. In 2015, he purchased a homeowners insurance policy from Amica that covered him from March 10, 2015, through March 10, 2016. The coverage limit for replacing his house in the event of a loss was $311,000, for which Gottlieb paid a $730 premium. The policy also contained an endorsement providing additional coverage of up to 130% of the coverage limit if Gottlieb agreed to certain conditions, including that Amica could adjust the coverage limit and the premium "in accordance with" "property evaluations [Amica] make[s]" and "[a]ny increases in inflation." The policy contained no other language allowing Amica to increase coverage limits. No loss occurred during the one-year term of the policy. The proposed premium for the renewal policy was $795 ($65 more than the premium for the original policy). Sixteen dollars of the increase was due to a higher coverage limit for Gottlieb's house ($321,000 versus $311,000). Amica arrived at that coverage limit based on a multiplier calculated by a company called E2Value, Inc., which projected costs for Gottlieb's zip code based on various data sources. The rest of the increase was irrelevant to the suit. Gottlieb sued Amica, claiming that the increased coverage limit on his house and premium in the 2016-17 violated the terms of his contract with Amica. Gottlieb argued that the endorsement in his original policy limited how Amica could set the coverage limit in the renewal policy. Gottlieb also argued that even if Amica did not explicitly breach the policy, it breached the implied covenant of good faith and fair dealing. The district court found that the 2015-16 and 2016-17 policies were two separate contracts, so setting the initial coverage limit in the latter could not have violated the former. Moreover, the initial contract imposed no restrictions on how the new coverage limit in the renewal contract could be set. No covenant of good faith and fair dealing extended or created a freestanding obligation to use the within-term rules contained in the first policy for selecting the starting point of the renewal policy. ANALYSIS Gottlieb's breach of contract claim begins with the original policy's limitation on Amica's unilateral ability to change the coverage limit of $311,000 and the corresponding premium upon which the parties had agreed when they entered the contract. Had Gottlieb sought coverage from another insurer upon expiration of the policy, it is clear that no breach could have been claimed. The parties did not go their separate ways. Instead, they entered into a new policy – the renewal policy. In so doing, they agreed upon a new, slightly higher coverage limit of $321,000 (as compared to $311,000 in the prior year) and a corresponding premium of $795. During the term of that renewal policy, Amica never sought to charge Gottlieb more than that agreed-upon $795. Because the original policy did not limit Amica's freedom in proposing a coverage limit for the renewal policy, Gottlieb's breach of contract claim fails. Gottlieb's claim for breach of the implied covenant of good faith and fair dealing fares no better. The implied covenant is not a catch-all for altering the terms or scope of a contract. The covenant may not, however, be invoked to create rights and duties not otherwise provided for in the existing contractual relationship, as the purpose of the covenant is to guarantee that the parties remain faithful to the intended and agreed expectations of the parties in their performance. Amica's changes to the dwelling limit during the term of the original policy did not apply to the setting of the initial coverage limit in the renewal policy. The covenant of good faith and fair dealing does not secure this benefit that the contract never guaranteed in the first place. Nor did Amica do anything to deprive Gottlieb of the reasonably expected benefits of the policy. The policy plainly governs the relationship between the parties and the subject matter of the dispute (Gottlieb's premium), so Gottlieb's equitable claims are foreclosed here. In sum, the court was unable to conclude that Amica, by deception, sold Gottlieb coverage he could never use. He has thus not shown that he was injured by Amica. ZALMA OPINION Class Actions become viable when there are enough - thousands - of victims can claim to have lost a small amount. Gottlieb tried, by claiming a $16 claim, was worth millions because Amica has thousands of customers. The problem was, however, that a renewal policy is really a new and separate contract from the original policy. Since Gottlieb agreed to accept the new policy with new limits at the new premium established that he received what he paid for, nothing more and nothing less. A waste of money for defense counsel by Amica and a waste of the time of the court since there was simply no claim and no loss. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921;Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.

Payment of Renewal Premium is Acceptance of Policy as Written Ronald Morgan and Cheryl Morgan appealed from the trial court's grant of summary judgment in favor of Dickelman Insurance Agency, Inc., Dickelman Insurance, Inc., Jason Dickelman, and State Farm Fire and Casualty Co. (collectively Defendants) on the Morgans' complaint for breach of contract, promissory estoppel, negligence and fraud. In Ronald Morgan and Cheryl Morgan v. Dickelman Insurance Agency, Inc., Dickelman Insurance, Inc., Jason Dickelman, and State Farm Fire and Casualty Co., No. 22A-PL-892, Court of Appeals of Indiana (December 30, 2022) the Court of Appeal of Indiana made clear that an insured is required to protect their rights by reading the renewal notice of a policy. FACTS The facts most favorable to the Morgans as the nonmovants show that in 2007, they purchased a log home in Lafayette, Indiana. In 2008, they acquired homeowners insurance with State Farm. The Morgans paid insurance premiums through escrow funds held by their mortgage company. Each year, State Farm mailed the Morgans "renewal notices." The insureds did not recall looking at the notices. Dickelman, the State Farm agent, contacted the Morgans several times between 2011 and 2014 "to sit down and meet" with him, but they did not respond, and they never met with Dickelman to discuss their insurance coverage. In May 2012, Cheryl read that log homes could have higher replacement costs than ordinary houses and became concerned that their home might be underinsured. Cheryl called Dickelman Insurance and spoke with a female insurance representative. Cheryl initially requested a $250,000 increase in dwelling coverage, but the representative told her "that's way too much, way too much." There was no evidence in the record as to the amount of the higher premium. Cheryl never confirmed with Dickelman's office whether the requested additional coverage had been procured. In 2015 the Morgans submitted a claim to State Farm for extensive water damage to their home with a repair estimate of $712,000 to $800,000. Ultimately, State Farm paid the Morgans $330,034.88 for the claim, which represented their dwelling coverage limit for the policy period April 4, 2015, to April 4, 2016, plus inflation guard protection and the cost of debris removal. On September 20, 2017, the Morgans sued Defendants alleging breach of contract, promissory estoppel, negligence, and fraud. The trial court issued an order granting summary judgment for Defendants on all of the Morgans' claims. DISCUSSION AND DECISION In their complaint, the Morgans alleged that Defendants breached an oral agreement to increase their dwelling coverage by $150,000. In an affidavit, Dickelman attested that the Morgans never authorized Dickelman Insurance to increase the dwelling limits. Thus, Defendants' designated evidence established that they did not commit breach of contract. The basic requirements of a contract are offer, acceptance, consideration, and a meeting of the minds of the contracting parties. The general rule is that the delivery of a policy by the insurer to the insured upon the expiration of a policy without request by the insured is an offer which must be accepted by the insured before a contract of insurance is effective. In this case, State Farm mailed renewal certificates to the Morgans that clearly and unambiguously informed them of the amount of their policy dwelling coverage. In Indiana, "[I]nsureds have a duty to read and to know the contents of their insurance policies." [Safe Auto Ins. Co. v. Enter. Leasing Co. of Indianapolis, 889 N.E.2d 392, 397 (Ind.Ct.App. 2008).] A casual scan by an unsophisticated customer of the first page of the two-page 2013 renewal certificate would inform that person that the dwelling coverage was limited to $297,100 and that the premium charged was for this amount of coverage. By retaining the policy and paying the premium through an escrow account held by their mortgage company, the Morgans accepted the offer to renew. DUTY TO READ Insureds have a duty to read and to know the contents of their insurance policies. The traditional rule is that reliance upon the representation of another is not justified where the injured party has a written instrument available and fails or neglects to read it. The rationale for this exception to the general rule that one has a duty to read and know the contents of one's insurance policies is that an insurance contract is a detailed and complex instrument, drafted by expert legal counsel, and has been called a “contract of adhesion” for the reason that the insured is expected to 'adhere' to it as it is, with little or no choice as to its terms. In addition, as I explained in my new book, A Compact Book on How Judges Read, Understand, Interpret and Rule on Insurance Policy Issues, an insured rarely reads the insurance contract, and even if the insured did read the policy, it is doubtful that he or she would gain more knowledge "because of the technical language" yet the insured is obligated to know the non-technical parts like the policy limit and premium. This case involves an unambiguous dollar amount that appears on the first page of the renewal certificates. At least under the facts of this case, the dollar amount does not qualify as technical or complex language. If the Morgans had glanced at the first page of the renewal certificates, they certainly would have immediately recognized the coverage limit of their policy. As a matter of law the traditional rule that reliance is not justified where the injured party has a written instrument available and fails or neglects to read it, applies. The renewal certificates were simple and the amount of dwelling coverage was unambiguous. Had the Morgans looked at them, they would have seen that their coverage had not been increased by $150,000. Therefore, we conclude as a matter of law that the Morgans' reliance on Defendants' alleged statements was not justified. ZALMA OPINION My new book is available at Amazon.com as a hardcover here; a paperback here; and as a Kindle Book here explains why an insured is obligated to read and understand, at the very least, the non-technical part of their policy. Ignoring renewal notices, paying premium based on those notices, and ignoring the fact that the limits were not increased nor was the premium increased, is not the basis for a claim of breach of a clear and unambiguous contract that after paying the full policy limits was still sued claiming breach of contract and fraud because the insureds refused to acknowledge their own error and lack of concern for their obligations as insureds. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

New Book for the New Year To start off the New Year I published my newest insurance coverage and claims book entitled: A Compact Book on How Judges Read, Understand, Interpret and Rule on Insurance Policy Issues: Every Person Who is Insured Needs to Understand How Judges interpret Insurance Policies. The book provides those who are insured, insurance claims people, insurance claims executives, underwriters, insurance agents, insurance brokers, insurance coverage lawyers and policyholders lawyers an ability to understand how they should emulate the courts when interpreting an insurance policy to avoid taking untenable positions with regard to claims. Understanding the Terms and Conditions of an Insurance Policy The challenge faced by every person insured when making a claim is to determine what was insured and what was not insured. Similarly, every insurance claim professional when faced with the need to resolve a claim presented by an insured is required to determine if the insurance policy, by its wording, provides coverage to indemnify the insured or does not. To do so the insured and the insurance claim professional must read, understand, and interpret the policy and apply the wording of the policy to the facts determined by the claims investigation. To present or investigate a claim fairly both those insured and those representing the insurer must understand what insurance is and its history of indemnifying those who incur losses as a result of a fortuitous event. An insurance policy is a contract. It is a written agreement between the person named as insured and the insurer. Each party to the insurance contract make promises to each other. The insured, for example, promises to pay the premium charged and in the event of a claim cooperate in the investigation of the insurer and will do nothing to deprive the insurer of the benefits of the policy. The insurer, on the other hand, promises to thoroughly investigate each claim presented by the insured fairly and in good faith and to do nothing that will prevent the other to obtain the benefits of the contract. The Contract of Adhesion Since insurance policies are often contracts of adhesion written by the insurer that are available to an insured who is given two choices: to accept or reject the policy as written. Adhesion contracts are usually interpreted carefully to favor the insured since the insured had no choice regarding the promises made by the policy. Insurers believe that the contracts of insurance that they offer to the public are all clear, fair, and unambiguous. People insured, especially when their claim is rejected, consider the contracts to be unclear, ambiguous, confusing, and designed to avoid payments of legitimate claims. When the insurer and the insured fail to agree on the meaning of the policy wording, they take their disputes to the courts. Since courts in the United States have been asked to interpret insurance contracts for more than two centuries, they have developed methods and rules to allow fair and appropriate interpretations of a policy of insurance. Everyone faced with the need to deal with an insurance claim must be able to fulfill the requirements of the contract of insurance. To do so they must be ready and able to read and understand the policy. This book will help the reader read, understand and interpret an insurance policy the same way that a judge does so to resolve any claim without the need to seek the assistance of a court of law. Insurance is a Written Contract An insurance contract is one where one undertakes to indemnify another against loss, damage, or liability, arising from an unknown or contingent event. Regardless of the simplicity of the definition, insurance contracts are the most litigated type of contract effected in the United States. As a result, judges across the country are called upon to interpret the terms, conditions, and limitations of the policy to be able to resolve disputes over insurance coverage. When an insured, a claims representative, a claims manger, a coverage lawyer, or an insurance executive are faced with a dispute over coverage they must attempt to resolve the dispute applying the same methodology used by the courts. Since the interpretation of an insurance policy is primarily a question of law for a court, if the language of the policy is clear and unambiguous, the court should analyze the language of the policy interpreting the policy language, so that its plain and ordinary meaning controls. The Rules for Interpreting an Insurance Policy Trial and appellate courts have, over the last few centuries, set up methods and rules to read, understand, interpret, and apply the terms and conditions of a policy of insurance. The methods used by the courts should be emulated by every insured, policyholder lawyer, or insurance claim professional when faced with the obligation to determine if the policy provides coverage to indemnify the insured or not. Because insurance policies are contracts, judicial interpretation of them, like any other contract, is a question of law. [AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 818; Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264] While insurance contracts have distinctive features, they are still contracts to which the ordinary rules of contractual interpretation apply. The mutual intention of the parties at the time the contract was issued should govern its interpretation. Such intent is to be inferred, if possible, solely from the written provisions of the contract. The words in the contract are understood by the trial or appellate court in their "ordinary and popular sense" unless "used by the parties in a technical sense, or unless a special meaning is given to them by usage." Any ambiguous terms must be interpreted by the court in the sense the insurer believed the insured understood them at the time of formation, and ambiguities must be resolved in favor of coverage. The Rules for Contract Interpretation The California Supreme Court set forth rules for the interpretation of insurance policies, which is similar to that of almost every other state. As a result, courts must consider: Any ambiguity or uncertainty in an insurance policy is to be resolved by the court to favor the insured. If semantically permissible, the contract will be resolved by the court with a construction that will fairly achieve its manifest object of securing indemnity to the insured for the losses to which the insurance relates. A court faced with any reasonable doubt as to uncertain language must resolve the language against the insurer whether that doubt relates to the peril insured against or other relevant matters. The policy should be read as a layman would read it and not as it might be analyzed by an attorney or an insurance expert. An exclusionary clause must be conspicuous, plain, and clear and must be construed strictly against the insurer and liberally in favor of the insured. The policy should be read as a layman would read it and not as it might be analyzed by an attorney or an insurance expert. The book is available at Amazon.com as a hardcover here; a paperback here; and as a Kindle Book here. (c) 2022 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

There is More Than One Way to Skin A Fraudster DELAYED RESCISSION FAILS BUT EXCLUSION APPLIES Evanston Insurance Company appealed from a bench trial on an insurance-coverage dispute. After determining that Evanston failed to timely rescind the policy after learning that the insured lied on the application to avoid discovery of his embezzlement scheme, and that a policy exclusion did not apply, the district court required Evanston to continue defending Desert State Life Management against a class action arising from its former CEO's embezzlement scheme. In Evanston Insurance Company v. Desert State Life Management; Christopher Moya, et al, No. 21-2145, United States Court of Appeals, Tenth Circuit (December 30, 2022) the Tenth Circuit issued what it believed to be a Solomon-like decision that did justice to Evanston and Desert State. BACKGROUND Four things underlie the appeal: Paul Donisthorpe's application for the Evanston insurance policy, his embezzlement scheme, the former clients' class action, and Evanston's response to Donisthorpe's misconduct. Desert State Life Management was a New Mexico trust corporation that acted as a trustee for disabled individuals. From 2008 to March 2017, Donisthorpe served as its CEO. In October 2016, Donisthorpe applied for an Evanston professional-liability insurance policy on Desert State's behalf. Donisthorpe's response to the following application question was a lie: “Is the applicant [Desert State] or any principal, partner, owner, officer, director, employee, manager or managing member of the Applicant or any person(s) or organization(s) proposed for this insurance aware of any fact, circumstance, situation, incident or allegation of negligence or wrongdoing, which might afford grounds for any claim such as would fall under th[e] proposed insurance?" WARRANTY Donisthorpe, by the application warranted that he understood and accepted the notice and that the information contained in the application was true and that it "shall be the basis of the policy and deemed incorporated therein." Based on Donisthorpe's application responses, Evanston issued Desert State a professional-liability insurance policy. Despite the notices, coverages, and exclusions, Donisthorpe completed Evanston's application while running an embezzlement scheme that exposed Desert State to liability. Donisthorpe intentionally misappropriated and commingled over $4.9 million of Desert State's client funds for his own use. Donisthorpe hid his scheme by presenting fraudulent reports to Desert State's board of directors and to New Mexico regulators. In March, 2017 L. Helen Bennett, a Desert State director, told Evanston about Donisthorpe's misconduct. Evanston also began receiving claims from Desert State clients that confirmed Bennett's report. Evanston ultimately opted not to rescind the policy; instead, it notified Desert State that it wouldn't be renewing the policy. In August, Christopher Moya was appointed Desert State's receiver. In November 2017, Donisthorpe pleaded guilty to a two-count federal felony information charging him with wire fraud and money laundering. He was sentenced to 144 months in prison and was ordered to pay $6.8 million in restitution and a $4.8 million money judgment. Donisthorpe's criminal case triggered demands for restitution among former Desert State clients. By mid-December 2017, Evanston learned that Donisthorpe had pleaded guilty.Based on statements during his plea hearing, Evanston determined that Donisthorpe had made material misrepresentations when applying for insurance on Desert State's behalf. Evanston had no evidence that any Insured besides Donisthorpe had participated in the scheme, so Evanston assumed (correctly) that no Insured other than Donisthorpe had made material misrepresentations on the insurance application. In June-six months after learning of Donisthorpe's guilty plea-Evanston sent Moya a letter offering to rescind the policy. The company cited Donisthorpe's misrepresentations on Desert State's application. Evanston also refunded Desert State for the premiums paid under the policy. But Desert State did not accept the offer to rescind. DISCUSSION Evanston argued that the district court erred by denying rescission and by concluding that the policy required Evanston to defend Moya and Bennett against the class-action claims. RESCISSION MUST BE IMMEDIATE Rescission is an equitable remedy that results in the cancellation of a contract. It is available where there has been a misrepresentation of a material fact, the misrepresentation was made to be relied on, and has in fact been relied on. But a party seeking to rescind "must promptly exercise it or [the] same will be waived." [Putney v. Schmidt, 120 P. 720, 723 (N.M. 1911)] The district court's factual findings belie any suggestion that Evanston acted promptly in seeking to rescind the policy. Evanston knew about this guilty plea by mid-December. Evanston was on notice of its right to rescind as early as March 2017, when Bennett first relayed Donisthorpe's misconduct to the insurer. Circumstances outside a party's control can excuse a delayed rescission. Here, by contrast, Evanston faced few (if any) obstacles in rescinding, especially once it learned in December 2017 that Donisthorpe had pleaded guilty. Because the undisputed facts establish that Evanston waited too long to rescind the policy, the Tenth Circuit held that the district court did not err in concluding that Putney effectively barred Evanston's rescission claim. EXCLUSION P Rescission was not the only remedy available to Evanston. In New Mexico, unambiguous contract provisions are applied, not interpreted. Although New Mexico courts generally interpret exclusionary language narrowly, they do not apply this principle to override the clear and unambiguous terms of an exclusion. Because the unambiguous plain language controls, the Tenth Circuit applied Exclusion P as written. The class-action negligence claims arose out of Donisthorpe's commingling. In other words, the claims "originate from, and therefore, the claims all flow from Donisthorpe's misconduct. Evanston did not have a duty to defend Moya and Bennett under the policy. On rescission, the Tenth Circuit affirmed the district court. But, it reversed the district court's ruling on Exclusion P and remanded the case with instructions to enter judgment for Evanston and against Moya and Bennett. A concurring opinion argued that Evanston was fast enough in rescinding the policy but that fact was irrelevant because of the application of the exclusion. Therefore, Evanston owed nothing, was entitled to keep the premium it tried to return, and owed nothing to the defendants. ZALMA OPINION Although rescission was an obvious remedy - the policy was obtained by a lie told by a criminal trying to hide his crime - Evanston deprived itself of the right to rescind by its delay. Regardless, the exclusion was clear and unambiguous and, as a result, it owed neither defense nor indemnity to the insured and its bankruptcy trustee. Liars never prosper and insurers who sit on their rights will lose them. In this case, if the policy was rescinded Evanston needed to return the premium but since the claim was excluded it was entitled to retain the premium and seek refund of defense costs expended, although that would be difficult, since the insured had almost no assets. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921;Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

ZIFL January 1, 2023- Volume 27, Issue 1 The Source for the Insurance Fraud Professional Starting the 27th year of publication of Zalma's Insurance Fraud Letter, ClaimSchool, Inc., Barry Zalma and the Zalma family wish you a happy and prosperous new year. Read the full pdf version of ZIFL at http://zalma.com/blog/wp-content/uploads/2022/12/ZIFL-01-01-2023.pdf Volume 1 contains articles including: New Florida Statutes The state of Florida proposed new statute to make insurance and insurance claims more fair is over 105 pages available at https://www.flsenate.gov/Session/Bill/2022A/2A/BillText/er/PDF. Lawmakers in Florida passed legislation to abolish controversial assignments of benefits on property claims, eliminate the one-way attorney-fee recovery provision that is unique to Florida law, and require that binding appraisals included in a policy be stated in a separate endorsement and include a premium reduction. Bad-faith litigation for failure to settle a property claim also may not be filed until after a court determines the insurer breached the contract and a final judgment is rendered against the insurer. Other provisions include shortening the time period to file property claims from two years to one, and requiring insurers to reduce the period to pay or deny a claim from 90 days to 60. Anyone insured with the state’s Citizens Insurance must also carry flood insurance. The provisions become law when signed by the Governor, which is expected as early as today. For those wishing more information on the new law, Coalition Against Insurance Fraud law firm member Greenberg Traurig has provided a detailed summary. Read the full pdf version of ZIFL at http://zalma.com/blog/wp-content/uploads/2022/12/ZIFL-01-01-2023.pdf Report From the California Department of Insurance About New Law Relating to Fraud A press release from the California Department of Insurance edited to report only new laws relating to insurance fraud: Beginning January 1, 2023, Californians will benefit from newly created consumer protections as eleven new state laws sponsored by Insurance Commissioner Ricardo Lara this past legislative session take effect. The new laws address climate change, expand health access and reproductive care, preserve health protections, protect against fraud, and ensure public safety. “Protecting consumers is my number one priority,” said Commissioner Lara. “Partnership with the Legislature and Governor Newsom is essential to my Department’s mission of bringing fairness for all in our oversight of the nation’s largest insurance market. I look forward to putting these eleven new laws into effect while taking further actions that benefit California consumers.” Read the full pdf version of ZIFL at http://zalma.com/blog/wp-content/uploads/2022/12/ZIFL-01-01-2023.pdf How to Add to the Professionalism of Insurance Claims Professionals Scot Strems Disbarred & Public Adjuster Facing Loss of License Florida Lawyer Who Used Cappers & Runners to Build a Practice Failed to Serve the Clients The Supreme Court of Florida on December 22, 2022, disbarred attorney Scott Strems who it found guilty of professional misconduct. You can read the full opinion here. The court’s reasoning included: Strems was the sole partner and owner of the Strems Law Firm, P.A. (SLF), and the firm’s caseload grew significantly from its inception. By 2016, the firm had only three litigation attorneys, with each managing approximately 700 cases. SLF’s inadequate staffing and lack of sufficient office procedures resulted in client neglect, case dismissals, frustrated judges, and costly sanctions on a near weekly basis. Read the full pdf version of ZIFL at http://zalma.com/blog/wp-content/uploads/2022/12/ZIFL-01-01-2023.pdf Health Insurance Fraud Convictions Woman Sentenced In Death Of 86-Year-Old Letticia Martinez, 28, pleaded guilty to neglect in the death of a resident at the Cappella Assisted Living and Memory Care facility in Grand Junction. She was sentenced to three years’ probation, 100 hours of community service and 30 days in jail. An investigation by the Medicaid Fraud Control Unit of the Colorado Department of Law and the Grand Junction Police Department found that Martinez, Jamie Johnston, 31, and Jenny Logan, 52, were responsible for the death of Hazel Place on June 14, 2021, after she was left outside alone in the heat for six hours. Martinez pleaded guilty to one count of caretaker neglect, a class 1 misdemeanor, and to a deferred sentence of negligent homicide, a class 5 felony. Johnston and Logan’s cases are ongoing. This is followed by dozens more reports of health insurance fraud convictions. Read the full pdf version of ZIFL at http://zalma.com/blog/wp-content/uploads/2022/12/ZIFL-01-01-2023.pdf The Genuine Dispute & Fairly Debatable Doctrines Defenses to the Tort of Bad Faith Insurers in states where the tort of bad faith exists (almost every state) who deny fraudulent insurance claims with fear and trembling. The specter of punitive damages has worked to make multi-millionaires of many insurance criminals who convince insurers to settle rather than take a chance on a trial of a suit alleging the insurer acted in bad faith. Every person working on a potential fraudulent claim must understand this important defense to the tort of bad faith. Read the full pdf version of ZIFL at http://zalma.com/blog/wp-content/uploads/2022/12/ZIFL-01-01-2023.pdf Other Insurance Fraud Convictions Buffalo Bus Driver Gets 5 Years Probation for Workers’ Compensation Claims Fraud Antoinette Laney of Kenmore, New York, a former bus driver for the Niagara Frontier Transportation Authority (NFTA) was sentenced to five years of probation for fraudulently obtaining workers’ compensation benefits by misrepresenting her injuries. She must also pay full restitution to the NFTA for money she was paid through workers’ compensation. Laney claimed that she was unable to perform her work as a bus driver at the NFTA and fraudulently obtained $30,212.69 in pay between September 2018 and February 2020 through workers’ compensation benefits. The defendant initially claimed that she was unable to work due to a right knee injury, but later amended the claim to a lower back and left knee injury. The district attorney’s office said its investigation also revealed that Laney performed work through Instacart and Ebay while continuing to collect workers’ compensation pay. Laney pleaded guilty to one count of grand larceny on September 26, 2022. She was sentenced this week before Erie County Court Judge Kenneth Case. Followed by many more other than health insurance fraud convictions. Read the full pdf version of ZIFL athttp://zalma.com/blog/wp-content/uploads/2022/12/ZIFL-01-01-2023.pdf It’s Time to Subscribe to Locals or Substack For Subscribers Only I Have Published Special Insurance Videos I have published on Locals.com more than 25 videos and two webinars to subscribers and more than 400 free videos. I also published on Substack.com hundreds of free videos and webinars of the Excellence in Claims Handling Program available only to Subscribers. The subscribers have access to all the videos and a webinar on “The Examination Under Oath A Tool Available to Insurers to Thoroughly Investigate Claims and Work to Defeat Fraud” among others. The videos start with the history of insurance and work their way through various types of insurance and how to obtain and deal with insurance claims. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to my publications at substack at substack.com/refer/barryzalma Go to substack at substack.com/refer/barryzalma Read the full pdf version of ZIFL at http://zalma.com/blog/wp-content/uploads/2022/12/ZIFL-01-01-2023.pdf (c) 2023 Barry Zalma & ClaimSchool, Inc. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921;Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library; and @Zalma on Truth Social.

ATTEMPT TO MAKE A CGL INTO A COURSE OF CONSTRUCTION POLICY FAILS On December 6, 2017, a fire destroyed the residence in Belle Chasse, Louisiana. The residence was under construction, but substantially completed at the time. In Numa C. Hero & Son, LLP Through Its General Partner George Allen Hero v. Brit UW Limited And Erwin Insurance Agency, Inc., No. 2022-CA-0405, Court of Appeals of Louisiana, Fourth Circuit (December 21, 2022) the Court of Appeals resolved Hero's claim for the destruction of the property even though because it was not described on the policy declarations page. The property was owned by Numa C. Hero & Son, LLP, through its general partner, George Allen Hero ("Hero"). Hero was constructing the residence on the above mentioned property, which upon completion was to be purchased by his daughter and son-in-law, Victoria and John Dillman. THE POLICY Through its agent, the Erwin Insurance Company, Inc. ("Erwin"), Hero had obtained an insurance policy (the 4S policy), covering a number of properties it owned, from Certain Underwriters at Lloyd's of London, primarily Brit UW Limited (hereinafter collectively referred to as "Brit UW" or "defendants"). The policy provided general liability and certain property damage coverage. It contained a commercial general liability coverage form; a building and personal property coverage form; and separate declarations for each type of coverage. The policy's declarations are separate and distinct for "Commercial Property Coverage" and "Commercial General Liability Coverage." The insuring agreement makes clear, with respect to property damage coverage (and not liability coverage), only "Covered Property" that is "described" in the Commercial Property Coverage Part Declarations, and for which "a Limit of Insurance is shown in the Declarations for that type of property" is covered. The Property Coverage Declarations describe no premises, building or structure in Belle Chasse or Plaquemines Parish, including the subject property. THE LITIGATION On June 4, 2018, Hero sued for damages for breach of contract and alternatively for malpractice against Brit UW and Erwin claiming property damaged by the fire at 431 Planters Canal Road. Hero contended that the house, then under construction, was covered by the 4S policy, and if the policy did not provide coverage, its insurance agent, Erwin, was liable for malpractice for failing to secure such insurance coverage. Although previous attempts at summary judgment failed the defendants were successful in their fourth attempt. They contended that there was no Commercial Property Coverage under the 4S policy for Hero's claim for fire damages sustained to the building under construction. In their motion for summary judgment, the defendants were able to make a prima facie case that there was no property damage coverage under the 4S policy for the structure that was destroyed by fire ANALYSIS The summary judgment procedure is designed to secure the just, speedy, and inexpensive determination of every action. The burden is on the adverse party to produce factual support sufficient to establish the existence of a genuine issue of material fact or that the mover is not entitled to judgment as a matter of law. A prior denial of a summary judgment does not preclude the granting of a similar, or even the same motion, later in the case. The party seeking insurance coverage bears the burden not only proving a relevant, existing policy, but also, coverage under that policy. The insuring agreement in the Building and Personal Property Coverage Form provides that: The Declarations section. Because the lot designation for 431 Planters Canal Road, listed as location 44 on Form 0033, is not referenced in the "Description of Premises" or the "Coverages Provided" sections; there is no indication of any "building" on that lot; there is no limit of insurance shown for that property or structure; and there is no premium charged for coverage. Based on the face of the Property Declarations, when compared with the Property Coverage insuring agreement, it was clear that commercial property coverage was not afforded for any structure located on Planters Canal Road. Accordingly, Hero failed to meet its burden to prove that Property Coverage existed for the structure under any policy, including the 4S Policy, issued by the defendants. Although Hero responded to the motion for summary judgment, Hero did not attach any "evidence" to show that the defendants were not entitled to summary judgment. Argument of counsel, which includes memoranda submitted in support of or in opposition to a motion for summary judgment, is not evidence, no matter how artful and persuasive. Likewise, argument of counsel and briefs, no matter how artful, are not sufficient to raise a genuine issue of material fact. Further, an opponent to a motion for summary judgment must attach evidence demonstrating a dispute in material issues of fact to its opposition and cannot merely incorporate by reference, exhibits previously attached to other legal documents. Accordingly, Hero failed to meet its evidentiary burden in opposition to the defendants' motion for summary judgment. Evidence, such as affidavits and deposition testimony, are permissible to determine whether an insurance policy is in force or where there is a factual issue as to the applicability of a provision of a policy. Also, the trial court's consideration of evidence in support of a motion for summary judgment is an evidentiary ruling which is subject to the abuse of discretion standard of review. The deposition testimony and affidavit offered in support of the defendants' motion were offered to show that no policy was in effect for the residence under construction and that neither Hero nor its agents ever requested such coverage. Hero's argument that it expected or believed that it had insurance coverage does not support a finding of ambiguity nor is it evidence that coverage was ordered or obtained. Insurance coverage is determined from the written instrument, not the parties' expectations. That Hero may not have known that another type of policy was required does not mean there is coverage under this policy, it only supports an action against Hero's broker. As such, there is no ambiguity in the insurance contract. All of the issues raised in this appeal were also raised by Hero in its motion for new trial; Hero asks the court to take a different view of the factual evidence, the deposition testimony, and its reading of the policy. Hero does not demonstrate that the trial court abused its discretion in any way. Accordingly, there was no abuse of discretion in the court's refusing to grant Hero a new trial. The trial court judgment granting of summary judgment in favor of the Brit UW defendants and against the Hero plaintiffs was affirmed. ZALMA OPINION A court will not change an orange into an apple by judicial fiat nor will it change a policy covering the insured's liability to third persons into a course of construction policy. If such a policy was ordered Hero may have a case against the agent. If not, the Hero plaintiffs received the coverage they ordered and the case against the agent will be difficult to prove. (c) 2022 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921;Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Proof Of Insurance Endorsement Does not Change Policy Exclusion of Employee Joshua Ochoa sued his employer, Riata Cattle Company, Inc. ("Riata") in Texas state co urt alleging that he suffered bodily injury when Riata's truck, which he was driving, malfunctioned and crashed due to Riata's failure to repair and maintain it. Ochoa claimed an endorsement required by state statute eliminated the employee exclusion. In National Liability & Fire Insurance Company v. Riata Cattle Company, Incorporated, also known as Riata Cattle Co., No. 21-40846, United States Court of Appeals, Fifth Circuit (December 21, 2022) the USCA resolved the dispute. This insurance coverage dispute arose from a single vehicle accident that led to a lawsuit by Joshua Ochoa against his employer, Riata Cattle Company, Inc. ("Riata"). Ochoa sued Riata in Texas state court alleging that he suffered bodily injury when Riata's truck, which he was driving, malfunctioned and crashed due to Riata's failure to repair and maintain it. Ochoa also alleged that Riata committed negligence and gross negligence by failing to provide him with safe equipment, failing to warn him of any dangers, failing to inspect or repair the equipment, and other negligence theories. Riata sought coverage defense from its auto liability insurer, National Liability &Fire Insurance Company ("National Liability"), which is currently defending Riata in the underlying litigation under a reservation of rights letter. National Liability sued seeking declaratory judgment seeking a determination that it owes Riata neither a defense nor indemnity under the insurance policy (the "Policy"). National Liability contends it is entitled to a declaratory judgment because the Policy excludes coverage for employees of Riata. Ochoa seems to concede this argument but contends that the "Form F" endorsement on the Policy compels National Liability to defend and indemnify Riata. THE TRIAL COURT DECISION The district court made two rulings: the Policy provides an exclusion with regard to the lawsuit brought by Riata's employee, Ochoa; and the Form F endorsement does not change that exclusion. The district court came to this conclusion because "it couldn't be clearer in the insurance policy . . . [that the employee is] not covered." THE POLICY Under the exclusion section of the Policy, coverage does not apply to an "'[e]mployee' of the 'insured' arising out of any course of: employment by the 'insured' or performing the duties related to the conduct of the 'insured's' business." An "'[e]mployee' includes a 'leased worker,' but does not include a 'temporary worker.'" A leased worker is not relevant for this case, and a "temporary worker" is defined as "a person who is furnished to you to substitute for a permanent 'employee' on leave or to meet seasonal or short-term workload conditions." DISCUSSION Ochoa alleged that he "was working in the course and scope of his employment with Defendant when he sustained serious and permanent injuries when the tractor trailer rig Defendant owned and provided to Plaintiff to drive, malfunctioned and caused a crash." Therefore, it was undisputed that Ochoa is Riata's employee and Riata is excluded from coverage under the Policy. Riata contends that the finding that Ochoa is its employee is not the end of the analysis. Specifically, Riata claims that the Form F endorsement "overrides exclusions in the underlying policy to provide an independent duty to defend[.]" Form F provides, in part, “[t]he certification of the policy, as proof of financial responsibility under the provisions of any state motor carrier law or regulation promulgated by any state commission having jurisdiction with respect thereto, amends the policy to provide insurance for automobile bodily injury and property damage liability in accordance with the provisions of such law or regulations to the extent of the coverage and limits of liability required thereby; provided only that the insured agrees to reimburse the company for any payment made by the company which it would not have been obligated to make under the terms of this policy except by reason of the obligation assumed in making such certification.” Form F is a statutorily required proof of insurance. TEX. TRANSP. CODE § 643.103. On its face, Form F does not guarantee anything. It exists to certify the policy as required by applicable regulations. Texas Transportation Code § 643.103 provides that "[a] motor carrier that is required to register under Subchapter B must file with the [Texas Department of Motor Vehicles ("TxDMV")] evidence of insurance . . . or evidence of financial responsibility . . . in a form prescribed by the [TxDMV]." The form prescribed by the TxDMV refers to Texas Transportation Code § 643.051, which provides, in part, that "a motor carrier may not operate a commercial motor vehicle . . . on a road or highway of this state unless the carrier registers with the [TxDMV] under this subchapter." These regulations require insurers to file Form F with the TxDMV. Under Texas law, Form F "protects third parties against the possibility that a motor carrier will be underinsured with regard to the requirements of state or federal law." [Lancer Ins. Co. v. Shelton, 245 Fed.Appx. 355, 357 (5th Cir. 2007).] And these regulations-which are designed to protect the public-are different and distinct from regulations that protect employees. As the district court noted, "[t]here is a difference between the public as opposed to … an employe who are excluded already in the insurance contract, to begin with." The purpose of state compulsory insurance laws and Form F is to protect members of the public who have been injured by the negligent acts of a motor carrier even if the vehicle involved in an accident is not covered under the motor carrier's insurance policy. Form F has no effect on the validity of the employee exclusions in the policy where the employer was not required by state law to obtain workers' compensation insurance or where workers' compensation was otherwise not available. Insurance contract endorsements frequently modify the terms of an insurance policy. But this is not the scenario here. Rather, Form F is a boilerplate endorsement filed with the Texas Department of Motor Vehicles and it serves as a "guaranty to the public that the insurer will be liable for any damages awarded if the insured is unable to pay." Form F exists to ensure that liability insurance is always available for the protection of motorists injured by commercial motor carriers. Employees are not considered members of the public for the purposes of Form F. Therefore, Form F does not save Riata's claims for coverage under the Policy. Since Ochoa was an employee of Riata, and according to the applicable Policy, National Liability is excluded from providing insurance coverage to Riata for the underlying litigation. And Form F does not change the employee exclusion in the Policy. ZALMA OPINION Ochoa and his counsel were creative in arguing Form F, it just didn't work because Form F was designed to protect innocent members of the public not employees who should be entitled to workers' compensation if they were injured in the course and scope of their employment. (c) 2022 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.

The Insured is Obligated to Read the Insurance Policy Every person that acquires a policy of insurance, whether designed to protect a dwelling, a commercial property, agriculture, crops from destruction by the actions of nature, or from liability arising from claims of torts, or cyber-attacks, must read and understand the policy before it is acquired to determine it provides the coverage requested. It must be read again before making a claim to an insurer. A majority of the courts that have been called upon to interpret an insurance policy require that the person seeking insurance must read the insurance contract or - at the very least - have, a lawyer or insurance professional read, understand and explain the policy to the person acquiring the insurance. For the last 55 years I have asked people making claims on an insurance policy whether they have read and understood their insurance policy. Most just laughed and claimed they never tried. Two, in my career, answered "yes." After further questioning it became obvious that both lied since they knew nothing about the terms or conditions of the policy, they claimed they had read and understood. These facts horrify me as an insurance coverage lawyer, a consultant and an expert witness testifying in courts across the United States about the purchase and sale of insurance contracts and insurance claims handling. My career, starting as a trainee adjuster in 1967 and later as an insurance coverage lawyer required that I read, understand and apply insurance policies issued by my clients to individuals and businesses. I have written, edited or revised, policies of insurance on behalf of insurer clients. I even read insurance policies I acquire to protect my property and protect me against tort liability before I order the policy. I know I am unusual, but I should not be. My practice should be the norm. What is Insurance? Many states have different definitions of the word "insurance" but each have the same essential elements: It must be a written contract. One party (the insurer) agrees with the other (the insured) as to the insurance provided. The insurer, for consideration (payment of a premium) agrees to indemnify the insured against a contingent or unknown event. The promise to indemnify is limited to certain identified risks of loss arising from a fortuitous, contingent or unknown event. Insurance is a contract like all other contracts. No one should enter into a contract ignorant of its terms and conditions. Many people would never sign a lease without reading it. No businessperson will sign a lease until he or she has been advised by a lawyer representing the businessperson alone, of its terms, conditions, limitations, and whether it is favorable to the person seeking to lease commercial property. No one should agree to the terms of a mortgage without reading the contract. Insurance contracts, however, are almost never read by the person insured. Some are not read by the agent, broker or underwriter who sell the insurance, or the lawyers retained to enforce it. Yet hundreds of hours of the work of insurance professionals are involved in the writing of policies of insurance. There is no viable excuse for not reading an insurance policy. Modern insurance policies, as a result of state statutes, are required to be written in plain language or easy to read language sufficient for anyone with a fourth‑grade education to understand. I describe the modern language of insurance policies as "Sesame Street English." Why, then, do people fail to read their insurance policy? Insurance policies have a bad reputation. People believe insurance policies are impossible to understand. Courts in the past have encouraged this belief. Policies are believed by the common person to be confusing and complicated. Sections of the contract are frequently cross‑referenced to other sections of the policy, often in a convoluted way. Insurance companies strive to make their policies as clear as possible because when coverage is subject to a legal challenge, ambiguity in the language will always be interpreted in a way that favors the insured, not the insurer. For example, in Insurance Company of North America v. Electronic Purification Company, 67 Cal. 2d 679, 689, 63 Cal. Rptr. 382, 433 (1967) the California Supreme Court noted: [T]he insurance company gave the insured coverage in relatively simple language easily understood by the common man in the marketplace but attempted to take away a portion of this same coverage in paragraphs and language which even a lawyer, be he from Philadelphia or Bungy, would find difficult to comprehend. Courts, called upon to interpret or enforce a contract of insurance, will always conclude that if an insurance contract is neither ambiguous nor difficult to comprehend, it will be enforced as written. [Sharbono v. Universal Underwriters Ins. Co., 139 Wash. App. 383, 394 (2007)] If twenty‑first century judges want to make better sense of the insurance area of law, they should start by understanding and admitting that: Almost nobody reads everything he or she signs; Almost nobody is able to read everything he or she signs; What drafters do want is to be able to treat those insured as if he or she had read everything. Drafters of insurance policies do not care if, in fact, he or she has not - and, indeed, in many cases would prefer that he or she did not. Do not call it a duty. That just adds insult to injury. However, it is black letter law that one who knowingly and voluntarily assents to a contract whose terms are contained in a writing should be held legally responsible for his or her actions by being held to those terms, in the absence of fraud, mistake, or other excusing cause. A party cannot negotiate, enter into and perform under a contract, only to later claim that it objected to some provision of the contract and thus retained a mental reservation to the terms of the agreement. Such a holding creates the risk that any disgruntled party may belatedly assert a lack of "voluntary" assent to a contract that it executed and performed. [DJ Mortg., LLC v. Synovus Bank, 750 S.E.2d 797, 325 Ga.App. 382 (Ga. App. 2013)] Whether almost no one reads their insurance policies, and my experience seems to establish the fact, that fact does not make them less effective contracts. An adhesion contract only means the person offering the contract gives the person to whom it is offered only two choices: accept the contract or reject the contract. If accepted the contract is enforceable. Plain Language Policies The need for - plain language - in an insurance policy was first described in the United States in the early 1950s. The Federal Government's most recent plain‑language initiative began in 1998, when President Clinton issued a Memorandum on Plain Language in Government Writing to the heads of executive departments and agencies. He said: We are determined to make the Government more responsive, accessible, and understandable in its communications with the public. By using plain language, we send a clear message about what the Government is doing, what it requires, and what services it offers. Plain language saves the Government and the private sector time, effort, and money. [President Clinton. Memorandum for the Heads of Executive Departments and Agencies on Plain Language in Government Writing. June 1, 1998. There is no one generally accepted definition of plain language or plain English. But most people agree that a plain‑language document is one in which people can: Find what they need, Understand what they find, and Act appropriately on that understanding. Key elements of plain language are to: Organize information so the most important behavioral or action points come first; Break complex information into understandable chunks; Use simple language or define technical terms; and Provide ample white space so pages look easy to read. In addition to the key elements, there are dozens of plain‑language guidelines and techniques such as using short sentences and active voice when possible. Document design principles highlight the importance of organization and format and enhance the impact of plain language. Good document design required bringing together prose, graphics and typography for purposes of instruction, information, or persuasion. Plain language does not require the writer of an insurance policy to - dumb down - the policy or eliminate the required precision necessary to make a contract enforceable. Sometimes, insurance professionals are concerned that using plain language will oversimplify information to the point where it is inaccurate or worthless. Plain language is not anti‑intellectual, unsophisticated, drab, or inadequate. Plain language has to do with clear and effective communication and should be considered nothing more nor less. It is the style of Abraham Lincoln, Mark Twain, and Winston Churchill Plain language is not just about vocabulary or grade level. Writing to a certain grade level does not necessarily ensure that the message is in plain language or understood by the intended audience. All materials, all terms and all conditions, especially in an insurance policy, should be evaluated for understanding with the intended users, regardless of grade‑level score. States followed the direction set by the federal government and required insurers to modify their insurance policies to be written in plain language. In doing so, the plain language insurance policies took away the argument that the policy was too hard to understand and, for that reason, should not be enforced to the detriment of the insurer. So, why, with the new, easy to read, plain language policies, do people fail to read the insurance policy? There is no logical answer. Perhaps it is the imbedded prejudice that makes some people believe they could never understand a policy even if they tried to read it. More likely it is simply the fact that most people trust the insurance agent or broker who obtained the policy for them and trust – often, without cause – the agent or broker to get the coverages they needed. From my 55‑years reading and interpreting insurance contracts I can only say that those people who did not read their policy get very upset when their insurance agent or broker tells them they acquired the best available policy and that it covers almost everything. However, in fact, it does not mean the policy covered every possible contingency. When an adjuster or lawyer points out that there is no available coverage for their claim, they contend they were deceived. Had the insured read the policy before it was acquired, he or she would know that no insurance policy covers every possible risk of loss faced by a person or business. Some risks of loss are difficult, if not impossible, to insure. Consider the risk of loss by war, atomic attack, earthquake, flood, etc. can be insured but only for extremely high premium and deductibles or self‑insured retentions so expensive to make such coverages unsaleable. Most insurance policies, as a result, exclude - in clear and unambiguous language - coverage for those extreme risks. The person insured who does not read the policy will be upset when his property is destroyed by a flood or earthquake. Had he read the policy and wanted coverage for earthquake or flood he or she would have been directed to a specialty insurer who is in business to issue a policy - probably expensive - that provides that coverage. The duty to read a policy appears in multiple jurisdictions. For example: In Georgia, the insured has a duty to read and understand the policy. [Cotton States Mut. Ins. Co. v. Coleman, 530 S.E.2d 229, 231 (Ga. Ct. App. 2000)] An insured who can read is required to read the policy and is presumed to have understood its contents. Any failure of an insured to acknowledge or notice these terms cannot circumvent a clear provision in the Certificate, as “[a]n insured has the duty to read the insurance policy or have it read to him or her.” [Jin Chai-Chen v. Metro. Life Ins. Co., 141 N.Y.S.3d 41, 43 (1st Dept. 2021); Am. S.S. Owners Mut. Prot. & Indem. Assn v. Carnival PLC (S.D. N.Y. 2022)] In Mississippi, a plaintiff is deemed as a matter of law to have read and understood the terms and conditions of his insurance contract. [Mladineo v. Schmidt, 52 So.3d 1154, 1167 (Miss. 2010)]. Under the duty‑to‑read and imputed‑knowledge doctrines, an insured is deemed to have knowledge of his insurance policy. An insured may not neglect or purposefully omit acquainting himself with the terms and conditions of the insurance policy and then complain of his ignorance of them. In Zaremba Equip, Inc v Harco Nat'l Ins Co, 280 Mich.App. 16; 761 N.W.2d 151 (2008) the Michigan Court of Appeal noted that an insured's duty to read insurance policy documents does not preclude a negligence action against the insurance agent. In that case, the plaintiff alleged negligence against the insurance agent on the basis that the agent failed to obtain the requested coverage or accurately represent the coverage obtained in the renewal policy. The jury found in favor of the plaintiff, and on appeal the Court of Appeal held that the trial court erred by failing to instruct the jury on comparative negligence regarding the plaintiff's failure to read the insurance policy and related documents. Because plaintiff's negligence claims in the instant case were tort-based, the Court of Appeal concluded that the plain language of the relevant statutes i.e., the comparative fault statutes, required the trial court to give defendants' requested instruction regarding comparative negligence. In addition, the Court of Appeal concluded that plaintiff's admitted failure to read the policy could qualify as comparative negligence and that the trial court should have permitted the jury to consider whether plaintiff unreasonably failed to read the insurance policy and related documents. [Holman v. Farm Bureau Gen. Ins. Co. (Mich. App. 2022)] In Texas, misrepresentation claims accrue when the policy is issued because the insured has a duty to read the policy and is responsible for understanding the policy's terms and conditions. [Khoei v. Stonebridge Life Insurance Co., No. H‑13‑2181, 2014 WL 585399, at *7 (S.D. Tex. Feb. 14, 2014).] Under Texas law, an insurance agent has no duty to explain policy terms, and the insured has a duty to read his [or her] insurance policy and is bound by its terms even if they were not fully explained. [Avila v. State Farm Fire & Cas. Co., 147 F. Supp. 2d 570, 581 (W.D. Tex. 1999); Dike v. Penn Ins. & Annuity Co., 295 F.Supp.3d 530 (E.D. Pa., 2018)] In Alabama, the insured was under a duty to read his insurance policy. [Alfa Life Ins. Corp. v. Reese, 185 So. 3d 1091, 1102‑04 (Ala. 2015)] Similarly, in West Virginia, a party to a contract has a duty to read the instrument. [Soliva v. Shand, Morahan & Co., Inc., 176 W. Va. 430, 345 S.E.2d 33 (1986)] Finding that an insured had a duty to read the coverage reduction provision, as directed by his insurer. [American States Ins. Co. v. Surbaugh, 231 W. Va. 288, 299, 745 S.E.2d 179, 190 (2013)] In so ruling, the West Virginia supreme court explained: In simple terms, the Court's decision is based on the premise that consumers do not read (and even if they do read, cannot understand) the terms that insurance companies use in insurance policies. Insurance companies give consumers the impression that they have full coverage under a comprehensive policy, and routinely fail to tell the consumer in plain English of the existence and the meaning of the legalistic exclusions that the insurance company has buried in a policy. So, when an insurance company seeks to avoid liability on an automobile insurance policy through the use of an exclusion, courts should first determine whether the insurance company created a reasonable expectation of coverage in the consumer, and whether the insurance company eliminated that expectation by telling the policyholder (1) that their coverage has been reduced or eliminated by the exclusion, and (2) that their premiums have been reduced to reflect the exclusion. [Mitchell v. Broadnax, 208 W.Va. 36, 537 S.E.2d 882 (W. Va., 2000)] In California, the general rule is that one who assents to a contract is bound by its provisions and cannot complain of unfamiliarity with the language of the instrument. [Madden v. Kaiser Found. Hosps., 17 Cal. 3d 699, 710 (1976).] An insured has a duty to read his policy. [Fields v. Blue Shield of Cal., 163 Cal.App.3d 570, 578 (1985).] If the language of an insurance contract is in fact clear and unequivocal, a party will be bound by its plain meaning, because >an insured has a duty to read his insurance policy. [Hallowell v. State Farm Mut. Auto. Ins. Co., 443 A.2d 925] Also, generally, a contracting party should discover mistakes at the time the contract is executed. [John HancockMut. Life Ins. Co. v. Cohen, 254 F.2d 417, 423 (9th Cir. 1958) (noting “one who is presented with an insurance policy has the duty to read it,” and finding this applies equally to the company issuing the policy); Lennar Mare Island, 139 F.Supp.3d at 1165 (finding insurer should have discovered mistake at time of signing insurance contract); Fin. Indem. Co. v. Messick (E.D. Cal. 2022)] In Indiana, an insured has a duty to read and become familiar with the contents of an insurance policy. [National Mut. Ins. Co. v. Curtis, 867 N.E.2d 631, 635 (Ind.Ct.App.2007). However, a different scenario arises if an insured relies upon the representation of the insurer or its agent that a particular loss is covered, as reasonable reliance upon an agent's representations as to what will be covered under a policy can override the insured's duty to read the policy.[Filip v. Block, 879 N.E.2d 1076, 1084 (Ind.2008) (citing Village Furniture, Inc. v. Associated Ins. Managers, Inc., 541 N.E.2d 306, 308 (Ind.Ct.App.1989)] In New Mexico, it is a fundamental tenet of contract law Athat each party to a contract has a duty to read and familiarize himself with the contents of the contract, each party generally is presumed to know the terms of the agreement, and each is ordinarily bound thereby.” [Ballard v. Chavez, 1994‑NMSC‑007, & 8, 868 P.2d 646, 648.] Under Washington law, the insured has an affirmative duty to read her policy and be on notice of the terms and conditions of that policy. [Dombrosky v. Farmers Ins. Co. of Washington, 54 Wash.App. 245, 257, 928 P.2d 1127 (1996); Int'l Marine Underwriters v. ABCD Marine, LLC, 313 P.3d 395, 402 n.14 (Wash. 2013)] In North Carolina, a person of mature years of sound mind who can read or write who signs or accepts a deed or formal contract affecting his pecuniary interest, it is his duty to read it, and knowledge of the contents will be imputed to him. Where an insured failed to use reasonable diligence by not reading the insurance policy he was not allowed to complain. [Holmes v. Sheppard, 805 S.E.2d 371, 376 (N.C. App. 2017)] Generally, in North Carolina, State Farm Mut. Auto. Ins. Co. v. Gaylor, 190 N.C. App. 448, 452, 660 S.E.2d 104, 107 (2008), requires persons entering contracts of insurance, like other contracts, to have a duty to read them and ordinarily are charged with knowledge of their contents. Where a party has reasonable opportunity to read the instrument in question, and the language of the instrument is clear, unambiguous and easily understood, failure to read the instrument bars that party from asserting its belief that the policy contained provisions which it does not. The events, communications, and documents in the record should only have alerted plaintiffs of the need to investigate their potential insurance coverage and make certain of any applicable insurance policies as soon as possible. [JBL Commc'ns, Inc. v. Amco Ins. Co., 865 S.E.2d 373(Table) (N.C. App. 2021)] Applying federal law, an Oregon District Court made clear that the insured had a duty to read the policy and acted unreasonably in relying on adjusters provided only as a A courtesy by an insurer fulfilling a National Flood Insurance policy. [Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380, 385 (1947)); Surfsand Resort, LLC v. Nationwide Mut. Fire Ins. Co. (D. Or., 2018)] Given the special nature of the insurance relationship involved under the NFIP, courts have made it clear that an insured has a duty to read and understand the terms of its SFIP. [Richmond Printing LLC v. Dir. Fed. Emergency Mgmt. Agency, 72 F. App'x 92, 98 (5th Cir. 2003)] In Illinois, the court has specifically recognized an insured's duty to read an insurance policy. [Perelman v. Fisher, 298 Ill. App. 3d 1007 1011, 233 Ill. Dec. 88, 700 N.E.2d 189 (1998)] When an insured sues his or her insurer after failing to note a discrepancy between the policy issued and received and the policy requested or expected, the insured will be bound by the contract terms because he or she is under a duty to read the policy. [First Mercury Ins. Co. v. Ciolino, 2018 IL App (1st) 171532, 107 N.E.3d 240 (Ill. App., 2018)] In Michigan, an insurance policy is, like any other contract, an agreement between two parties. [Tenneco Inc v. Amerisure Mut. Ins. Co., 281 Mich. App. 429, 444; 761 N.W.2d 846 (2008).] The goal in the interpretation of a contract is to honor the intent of the parties. [Klapp v. United Ins. Group Agency, Inc, 468 Mich 459, 473; 663 N.W.2d 447 (2003)]. The primary source of a policy of insurance is the language of the contract itself. [City of Grosse Pointe Park, 473 Mich. at 197‑198. Thus, insurance policies are enforced according to their terms, and a court may not hold an insurer liable for a risk it did not assume.] [Liparoto Const, Inc. v. Gen Shale Brick, Inc., 284 Mich. App. 25, 35; 772 N.W.2d 801 (2009).] In ordinary circumstances, the insured has no duty to read a renewal policy sent to him or her and may assume that the renewed policy contains the same terms and conditions as the previous policy unless warned that the renewal policy has changed. [Government Employees Ins. Co. v. United States, 400 F.2d 172, 175 (10th Cir. 1968); Whiteside v. New Castle Mut. Ins. Co., 595 F.Supp. 1096 (D. Del., 1984)] Reliance on Superior Expertise of Others An insured Plaintiff had a right to rely on the superior expertise of his, her or its agent and had the right to assume that its agent performed its duty. Thus, contrary to the defendant's contention, the plaintiff had no duty to read the policy if he, she or it relied on the superior expertise of the agent. [United Olympic Life Ins. Co. v. Gunther, 19 F.3d 1441, 1994 WL 96328 (9th Cir., 1994)] In Pennsylvania, the Pennsylvania Supreme Court has stated that the idea that people do not read or are under no duty to read a written insurance policy is not novel [Rempel v. Nationwide Life Ins. Co., Inc., 471 Pa. 404, 370 A.2d 366, 368 (1977); Tran v. Metropolitan Life Ins. Co., 408 F.3d 130 (3rd Cir., 2005); (citing Dowling v. Merchs. Ins. Co., 168 Pa. 234, 31 A. 1087 (1895)]. The Rempel court elaborated on this principle and held that the policyholder had no duty to read the policy unless under the circumstances it is unreasonable not to read it and held that the question of whether policyholders' reliance on the agent's allegedly fraudulent representations was justifiable should be presented to the jury. [Tran v. Metropolitan Life Ins. Co., 408 F.3d 130 (3rd Cir., 2005)] It was also held that the policyholder has no duty to read the policy unless under the circumstances it is unreasonable not to read it. [Tonkovic v. State Farm Mut. Auto. Ins. Co., 513 Pa. 445, 521 A.2d 920 (Pa., 1987)] In Kansas, the courts provide an insured an exception to the requirement that the insured read the policy. The Tenth Circuit found it clear that in Kansas the insured may assume that an insurance policy will conform to the application. The insured may rely on this assumption and is under no duty to read the policy to see whether it does in fact conform. [Stamps v. Consolidated Underwriters, 205 Kan. 187, 468 P.2d 84; German American Ins. Co. v. Darrin, 80 Kan. 578, 103 P. 87. The purpose of allowing such relief is to make the insurance policy reflect the expectations of the insureds when they executed the application. [Rider v. State Farm Mut. Auto. Ins. Co., 514 F.2d 780 (10th Cir., 1975)] Only a Fiduciary is Obligated to Read or Explain the Terms of the Policy to the Insured An agent or broker has no duty to read or explain the terms of the contract to the insured absent a special, fiduciary relationship. [Smith v. Union Nat'l. Life Ins. Co., 286 F.Supp.2d 782, 787 (S.D.Miss. 2003)]. Mississippi law imposes no fiduciary duties on an insurance agent to an insured. [Walden v. Am. Gen. Life, 244 F.Supp.2d 689, 696-97 (S.D.Miss. 2003); Hicks v. N. Am. Co. for Life & Health Ins., 47 So.3d 181, 191 (Miss. Ct. App. 2010; Wilson v. Kemper Corp. Servs. (S.D. Miss. 2022)] When a court held that there may be no duty to read an insurance policy where misrepresentation and concealment are alleged under certain circumstances an insurer may be liable for misrepresentation or failure to deliver agreed‑upon coverage where the agent misleads the insured as to the extent of coverage, even though the insured did not read the policy and discover the actual extent of the coverage. [Lin v. John Hancock Variable Life Insurance Company, B189108 (Cal. App. 4/30/2007) (Cal. App., 2007)] It has long been the law in Oklahoma that an insured's failure to promptly examine a policy and discover departure from an insurance agent's assurances does not defeat reformation of the policy. [Commercial Casualty Insurance Co. v. Varner, 160 Okl. 141, 16 P.2d 118 (1932), followed by Warner v. Continental Casualty Co., 534 P.2d 695 (Okla.App.1975).] Under Oklahoma law, an insured has no duty to read his written policy and notice discrepancies between it and previous representations of a soliciting agent. [Business Interiors, Inc. v. Aetna Cas. and Sur. Co., 751 F.2d 361 (10th Cir., 1984)] The Insurance Contract is Usually Enforceable as Written If the contract is accepted, it should be binding upon both parties as long as it is clear and unambiguous and none of the exceptions to the requirement that the policy must be read by the insured it will be enforced as written. I don't believe it is necessary to change the language used by a court interpreting an insurance contract. I only expect that the court will interpret the contract as binding as long as it is clear and unambiguous and was not obtained as a result of mistake, misrepresentation of material fact, concealment of material fact or fraud. There is no question that most people, regardless of case law, do not read their insurance policy. Whether read or not all of those contracts are enforceable, and no one should argue that the terms should be ignored because they were not read. Courts, interpreting insurance policies, seeking to deal fairly and in good faith with both parties to the insurance contract, must: Recognize that all parties to the insurance contract are required to treat each other with the utmost good faith and do nothing to deprive the other of the benefits of the contract. Read every word in the insurance policy from: the cover sheet, to the declarations page, to the basic wording, to all endorsements, and every other word up to the signature by the insurer. Identify all parties to the contract. Determine whether the policy was acquired from an insurance agent representing the insurer or a broker representing the insured. Determine if the insured actually read the policy before ordering it. Determine if the insured read the policy after it was issued and delivered to the insured. Determine if any specialist B lawyer, risk manager, insurance consultant, agent or broker B advised the insured about the contents of the policy. Determine if any mistakes were made in the production of the policy wording. Determine if either party: Misrepresented a material fact. Concealed a material fact. Deceived the other. Attempted fraud. Defrauded the other. Determine if the policy wording contains any ambiguity that would affect the rights and obligations of the parties. Find the best way for each of the parties to the contract obtain the benefits of the contract. Determine how each party has treated the other with the utmost good faith and fair dealing. Make a ruling that is fair, reasonable, and allows the parties to the contract to keep the promises made. Is Failure to Read a Policy a Defense to Negligence of the Agent or Insurer? An insured has no right to rely on an agent's patently absurd interpretation of a policy. An insured may rightfully rely on an agent's plausible interpretation of a policy, so long as the interpretation does not conflict with the printed policy. [Flamme v. Wolf Ins. Agency, 239 Neb. 465, 476 N.W.2d 802 (1991); Bayer v. Lutheran Mut. Life Ins. Co., 184 Neb. 826, 172 N.W.2d 400 (1969).] If an insured could have read and understood the policy, then the insured should be charged with knowledge of the policy's contents. By analogy to misrepresentation rules and the rationale for those rules, the court will usually hold that absent a reason for the insured's failure to read the policy, if a policy provision is clear and unambiguous, then the insured's failure to read the policy provision will insulate the agent from liability for failure to explain that provision. This holding comports with decisions from other state courts. [Underwriters Adjusting Co. v. Knight, 193 Ga.App. 759, 389 S.E.2d 24 (1989) (insured's claim against agent for failure to procure proper insurance is defeated by the insured's failure to read the policy); Farm Bureau Mut. Ins. Co. v. Arnold, 175 Ga.App. 850, 334 S.E.2d 733 (1985) (insured's claim against agent for failure to procure proper insurance was not defeated because a reading of the policy would not have revealed the defect); Barnes v. Levenstein, 160 Ga.App. 115, 286 S.E.2d 345 (1981) (insured's claim against agent for failure to procure proper coverage is defeated because reading the policy would have informed the insured of the lacking coverage and because there was no good reason why the insured had failed to read the policy); Heritage Manor of Blaylock v. Petersson, 677 S.W.2d 689 (Tex.App.1984) (insured had a duty to read the policy and, failing to do so, would be charged with knowledge of its contents). Town & Country Mut. Ins. Co. v. Savage, 421 N.E.2d 704 (Ind.App.1981) (insured's failure to read the policy can be raised as contributory negligence); Martini v. Beaverton Ins. Agency, Inc., 314 Or. 200, 838 P.2d 1061 (1992) (insured's failure to read the policy can be raised as contributory negligence). Several courts have held, similarly, that an agent has no duty to explain clear and unambiguous policy terms. [Bush v. Mayerstein-Burnell Financial Services, 499 N.E.2d 755 (Ind.App.1986); Banker v. Valley Forge Ins. Co., 363 Pa. Super. 456, 526 A.2d 434 (1987); Dahlke v. John F. Zimmer Ins. Agency, Inc., 515 N.W.2d 767, 245 Neb. 800 (Neb. 1994)] When a plaintiff's admitted failure to read the policy qualifies as comparative negligence a trial court should have permitted the jury to consider whether plaintiff unreasonably failed to read the insurance policy and related documents. [Holman v. Farm Bureau Gen. Ins. Co. (Mich. App. 2022)] Where a party has reasonable opportunity to read the instrument in question, and the language of the instrument is clear, unambiguous and easily understood, failure to read the instrument bars that party from asserting its belief that the policy contained provisions which it does not. [Jasmen Corp. v. Edwards (E.D. N.C. 2022)] The Virginia Supreme Court, in General Ins. of Roanoke, Inc. v. Page, 464 S.E.2d 343, 250 Va. 409 (1995) the defendant agent contended on appeal, as it did at trial, that the insured, Page's, failure to read the insurance policy constituted negligence, as a matter of law, and that such negligence proximately caused his losses and precluded recovery against it. A person who signs an application for life insurance without reading the application or having someone read it to him is chargeable with notice of the application's contents and is bound thereby. [Peoples Life Ins. Co. v. Parker, 179 Va. 662, 667, 20 S.E.2d 485, 487 (1942); Royal Insurance Co. v. Poole, 148 Va. 363, 376-77, 138 S.E. 487, 491 (1927).] Similarly, failure of a grantor to read a deed will not relieve him of obligations contained therein. [Carter v. Carter, 223 Va. 505, 509, 291 S.E.2d 218, 221 (1982).] In Metro Realty v. Woolard, 223 Va. 92, 99, 286 S.E.2d 197, 200 (1982) held that absent fraud, one who has capacity to understand written document and signs it without reading it or having it read to him is bound thereby.] In Oregon, the Supreme Court noted that although the parties and the trial court characterized the issue as whether plaintiff had a "duty to read the insurance policy," it refused to deal with duty but, rather, emphasized that the issue is not whether plaintiff had a "duty." Rather, the issues are framed more precisely this way: May defendant raise plaintiff's failure to read the policy as a specification of comparative fault? Was there evidence from which the jury could have found that, in the circumstances of this case, it was unreasonable in the light of foreseeable risks for plaintiff not to read the policy and that plaintiff's unreasonable failure to read the policy contributed to his damages? The answer both of those questions was "yes." The trial court committed reversible error when it struck defendant's specification of comparative fault alleging that plaintiff failed to read the insurance policy after obtaining the policy from defendant and when it instructed the jury not to consider plaintiff's failure to read the insurance policy in assessing his comparative fault. Accordingly, the Supreme Court reversed the trial court. [Martini v. Beaverton Ins. Agency, Inc., 314 Or. 200, 838 P.2d 1061 (Or. 1992)] In Kentucky, the Supreme Court, unlike other courts, concluded that the trial court erred when it found appellants contributorily negligent by virtue of their failure to read and understand the fire insurance. [Grisby v. Mountain Valley Ins. Agency, Inc., 795 S.W.2d 372 (Ky. 1990)] In New Jersey, the comparative fault defense traditionally will not apply in a plaintiff's suit alleging a professional's malpractice, at least in those cases in which the defendant argues that the plaintiff was at fault in failing to understand or to perform the task for which the professional was hired. The Supreme Court of New Jersey held that the comparative negligence defense is unavailable to a professional insurance broker who asserts that the client failed to read the policy and failed to detect the broker's own negligence. It is the broker, not the insured, who is the expert, and the client is entitled to rely on that professional's expertise in faithfully performing the very job he or she was hired to do. [Aden v. Fortsh, 169 N.J. 64, 776 A.2d 792 (N.J. 2001)] In Frank B. Hall & Co. v. Beach, Inc., 733 S.W.2d 251 the "failure to read" defense was raised after the insured sued the broker, Frank B. Hall & Co., and the carrier for failure to pay a claim, violations of the DTPA and negligence. Hall affirmatively pled failure to read the policies as a defense and the insured's president admitted that he did not read the policies. Hall contended the trial court erred in failing to submit its requested issue to the jury regarding negligence in failing to read the insurance policies. The court agreed that Hall's issues on failure to read the policies should have been submitted as to the negligence issue. The court stated contributory negligence was a common-law defense and thus could not be used to defeat recovery under Texas statutes. The court determined this rule was equally applicable to Insurance Code claims and held any contributory negligence attributable to the insured could not defeat recovery on its Insurance Code claims. [Wyly v. Integrity Ins. Solutions, 502 S.W.3d 901 (Tex. App. 2016)] In conclusion, if insurance companies are to be required to so frame their policies so that the purchaser may easily understand just what he is getting in the way of coverage for his insurance dollar, it is a matter which addresses itself to the sound discretion of the lawmaking authority. It is not the function of courts to make contracts for the parties nor to protect the unwary purchaser of an insurance policy against his failure to read carefully and understand the extreme limitations of the protection afforded him by the terms of a cheap insurance policy. [Foster v. North American Acc. Ins. Co., 86 S.W.2d 476 (Tex. App. 1935)] The Law of Unintended Consequences It took quite a few years but finally the Legislatures enacted the “easy to read” statutes compelling insurers to use common language easily understood by the public. In so doing, policies became less precise and contrary to the intent of the statutes, there is more litigation claiming ambiguities in insurance contracts that must be construed against the insurer. The law of unintended consequences took hold and easy to read policies have grown insurance coverage litigation logarithmically. (c) 2022 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921;Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

No Breach of Contract No Bad Faith Failure to Read Policy Fatal to Insured’s Claim In Michel Ngakoue v. Safeco Insurance Company Of Indiana, No. 1:22-CV-00363-LY, United States District Court, W.D. Texas, Austin Division (December 19, 2022) the Magistrate Judge made recommendations to the District Judge regarding Safeco’s Motion for Summary Judgment. BACKGROUND Michel Ngakoue sued his insurance company, Safeco Insurance Company of Indiana, after his property damage claim under his landlord protection insurance policy was denied. Three buildings were located on the Property: two dwellings to be rented out as residences and a “main building” that could be used for commercial purposes (“Main Building”). Plaintiff contends that he bought the Property with the intention of opening numerous rental properties and utilizing the main building as a community center to which the space could be rented out for various meetings and parties. After buying the Property, Plaintiff alleges, he began using the Main Building “for commercial purposes and not as a residence.” The Policy provides coverage for certain “accidental direct physical loss” to the “dwelling” and “other structures” on the Property specifically excluded coverage for property used for commercial purposes. THE POLICY Section A of the Policy provides coverage to “the dwelling on the Described Location shown in the Declarations, used principally for dwelling purposes.” The Policy excluded coverage to other structures “used in whole or in part for commercial, manufacturing or farming purposes.” Plaintiff alleged that on February 20, 2021, the Main Building sustained direct physical damage as a result of a severe winter storm, with extensive interior damage, including walls, ceilings, flooring, and fixtures, due to a storm created rupture in the ceiling. Plaintiff alleged that the damage to the Main Building was approximately $24,326.39. On April 16, 2021, Defendant denied the claim on the basis that it was unable to identify any hail related damage to your property. Plaintiff sued alleging breach of contract, common law bad faith, fraud, and violations of the TDTPA and Sections 541 and 542 of the Texas Insurance Code Texas Insurance Law Because this case was removed from Texas state court on diversity jurisdiction, Texas substantive law applies. Texas law directs courts to apply a burden-shifting scheme. Initially, the insured has the burden of establishing coverage under the policy and if it does the defendant must prove that an exclusion applies. ANALYSIS Plaintiff alleged that Defendant wrongfully denied and mishandled his insurance claim. Breach of Contract The Policy contains a provision excluding coverage to “other structures . . . used in whole or in part for commercial, manufacturing or farming purposes.” Defendant argues that this “clear and unambiguous” exclusion bars coverage under the Policy because: “It is undisputed that Ngakoue used the structure as an events center for commercial purposes.” Plaintiff admitted that he used the Main Building “for commercial purposes and not as a residence.” The Commercial Purpose Exclusion Is Not Ambiguous Plaintiff argued that the commercial purpose exclusion in the Policy is ambiguous because it fails to define “commercial purpose,” and thus the Court must interpret the exclusion in favor of coverage. The Court found that Plaintiff failed to show that the commercial purposes exclusion is subject to two or more reasonable interpretations and thus did not show that the exclusion is ambiguous. Importantly, Plaintiff admitted that he used the Main Building for the “buying and selling” of services. Plaintiff does not dispute that the Policy clearly and unambiguously excluded “other structures” on the Property that are “used in whole or in part” for commercial purposes. And Plaintiff admits that he used the Main Building for commercial purposes: renting out the building as an event space in exchange for a fee. The Magistrate concluded that the Policy does not provide coverage for the Main Building, and Plaintiff cannot show that Defendant breached the Policy. The fact that the exclusion does not define commercial purpose created no ambiguity since the facts fit the ordinary meaning of the language used. Waiver and Estoppel Do Not Create Coverage Plaintiff also argued that Defendant should be estopped from relying on the commercial purpose exclusion under the Policy because it did not do so in its initial denial letter on April 16, 2021. Since the defendant did not seek a forfeiture of the Policy, but instead argued that the Policy does not cover one of the three buildings on the Property. Defendant continued to provide insurance coverage to the other two buildings on the Property until Plaintiff terminated the Policy in June 2021 so estoppel was not established. In Texas the doctrine of estoppel cannot be used to create insurance coverage when none exists by the terms of the policy. Waiver and estoppel may operate to avoid a forfeiture of a policy, but they have consistently been denied operative force to change, re-write and enlarge the risks covered by a policy. In other words, waiver and estoppel cannot create a new and different contract with respect to risks covered by the policy. [Texas Farmers Ins. Co. v. McGuire, 744 S.W.2d 601, 603 (Tex. 1988) (cleaned up); accord Minnesota Mut. Life Ins. Co. v. Morse, 487 S.W.2d 317, 320 (Tex. 1972)] Consistent with this precedent, because the Policy excludes coverage for property used for commercial purposes and the Main Building was used for commercial purposes, the doctrines of waiver and estoppel cannot be used to create coverage. Extra-Contractual Claims Because Plaintiff’s breach of contract claim fails, his claims of bad faith and statutory violations based on coverage issues and the denial of his claim also fail. As a result, the Magistrate Judge recommended that the District Court grant Safeco Insurance Company of Indiana’s Motions for Summary Judgment and dismiss Plaintiff’s lawsuit. ZALMA OPINION Plaintiff knew he intended to use one of the structures on the property for commercial purposes yet purchased a policy that excluded coverage for damage to one of the structures. Failure to read the policy when purchased, failure to explain the need for coverage of a commercial facility, was clearly the error of the Plaintiff. A homeowners type policy with a commercial use exclusion is not the type of coverage Plaintiff needed. He only covered the two dwellings but did not protect the structure intended for commercial use. (c) 2022 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921;Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

He Who Represents Himself Has a Fool for a Client Insurer Punished For Fulfilling Terms of Contract In Fiaze Issa v. Allstate Insurance, 2022 IL App (1st) 210343-U, No. 1-21-0343, Court of Appeals of Illinois, First District, Sixth Division (December 16, 2022) Mr. Issa sued its insurer for legal malpractice after defending its insured to a verdict, paid it in full, and refused Mr. Issa's request that it appeal the verdict. Mr. Issa, though not personally liable for any part of the judgment, wanted Allstate to appeal the judgment. Allstate declined to do so. Mr. Issa then filed a pro se complaint against Allstate for legal malpractice and breach of duty, alleging that his insurance premiums had increased as a result of the judgment against him. The circuit court granted Allstate's motion to dismiss the complaint and Mr. Issa appealed. BACKGROUND On October 15, 2017, Mr. Issa was an insured driver under Allstate's auto insurance policy when he rear-ended the vehicle of Alicia Contreras. Ms. Contreras filed suit against Mr. Issa seeking compensation for property damage and personal injury. Allstate defended Mr. Issa in that action, which Mr. Issa alleged resulted in a jury verdict for Ms. Contreras in the amount of $14,000. Mr. Issa further alleged that Allstate paid an additional $6000 to Ms. Contreras for damage to her vehicle. Allstate disputed the figures, but the parties agreed that the total amount paid to Ms. Contreras fell well beneath Mr. Issa's per-person policy limit of $100,000. Mr. Issa, acting as his own attorney, sued Allstate claiming both that Allstate's lawyer negligently committed certain errors at trial and that Allstate breached its duty to defend him in the litigation by failing to appeal the jury's verdict. Mr. Issa sought $1981.88 in compensatory damages-the amount he claimed Allstate had overcharged him for insurance coverage following his accident. The trial court held that Mr. Issa had failed to state a claim on which relief could be granted and, specifically, that he had failed to cite any legal authority establishing a duty to appeal the jury's verdict in the Contreras case. The court agreed that Allstate owed Mr. Issa a duty of good faith and fair dealing but concluded that it had fulfilled that duty by defending him in the underlying litigation and fully indemnifying him for the damages awarded to Ms. Contreras. ANALYSIS Legal Malpractice To state a claim for legal malpractice, a plaintiff must allege facts establishing that: the defendant attorney owed the plaintiff client a duty of due care arising from an attorney-client relationship, the attorney breached that duty, the client suffered an injury in the form of actual damages, and those damages were proximately caused by the breach. In cases involving litigation, no legal malpractice exists unless the attorney's negligence resulted in the loss of an underlying cause of action. Mr. Issa's sole contention is that the damages awarded to Ms. Contreras were inflated. Generally, an insurance policy gives rise to two duties on behalf of the insurer to the insured: the duty to defend and the duty to indemnify for covered losses. Although the duty to defend does not automatically encompass a duty to appeal an adverse judgment, such a duty can arise in the context of the duty of good faith and fair dealing owed by the insurer to its insured where reasonable grounds are present for bringing an appeal. However, because there was no adverse judgment exceeding the policy limits in this case there was no breach of duty by Allstate. There was no question that Allstate both fulfilled its duty to defend Mr. Issa in the Contreras case and indemnified him for the full amount of the judgment the jury rendered in Ms. Contreras's favor. Under these facts, Allstate had no duty to appeal the judgment. Dismissal of plaintiff's complaint with prejudice was affirmed where plaintiff failed to state a claim for legal malpractice or for breach of duty based on his insurer's election not to appeal a jury verdict falling within policy limits. ZALMA OPINION Proving that no good faith by an insurer goes unpunished Mr. Issa sued Allstate who did everything they promised to do by the policy - they defended Issa through a jury trial - and paid the verdict of the jury well within the policy limits. Since Allstate could have settled before the trial at its option paying the verdict was within its absolute right. If Issa's premium increased it did so because he negligent rear-ended Ms. Contreras. He, acting as his own lawyer, wasted the time of the court and his insurer costing them both a great deal of money to deal with his suit and appeal that he had no potential to succeed. (c) 2022 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.